With the rent being too damn high, many Americans are now opting to live with a roommate (or two or three in the case of San Francisco and Los Angeles). We now have a record number of adult Americans living with roommates. This coincides with a stagnant growth in the homeownership rate especially in crap shack intensive areas like SoCal. The market continues to be constrained by low supply and Taco Tuesday baby boomers living in properties that they would not be able to purchase today at current price levels. Many older home owners bought during an era where one income (even one blue collar income) was enough to purchase a home. That is no longer the case in many metro areas where dual income professionals and all cash buyers are the dominant buying force. So how many adult Americans are now living with roommates?

Roommate nation

As it turns out, many people are dealing with high rents by finding roommates:

“(Zillow) As rent consumes a growing share of household income in many cities, some people must relocate or find ways to offset rising prices. An increasingly popular way to cut costs is by adding a roommate. Nationally, 30 percent of working-age adults—aged 23 to 65—live in doubled-up households, up from a low of 21 percent in 2005 and 23 percent in 1990.”

So much for the affordability argument. Living like sardines is the new solution. And this is a record number of adult Americans living with roommates. And no, this isn’t looking at married people or couples:

“We define a doubled-up household as one in which at least two working-age, unmarried or un-partnered adults live together. For example, a 25-year-old son living with his middle-aged parents would constitute a doubled-up household, as would two 23-year-old roommates who are not partnered to each other. A doubled-up household contains people who might choose to live apart under different circumstances, financial or otherwise.”

And of course the rates are much higher in expensive areas like Los Angeles:

I’ve driven around many cities in SoCal and you see streets packed with cars and in some other areas you see five to six cars in places were only two to three cars should go. So you see this congestion already taking place. The idea of having a big lawn and open space just doesn’t fit in with our crowded market. In SoCal we have 22,000,000+ people all trying to live within 100 miles of the coast. And you feel this in the massive traffic in various cities.

Is this sustainable? As we have noted, much of the new housing construction is catering to the new needs of Millennials which is rental apartments or condos which are glorified apartments with mortgages. Sure, you have some Millennials wanting to be Taco Tuesday baby boomers version 2.0 but the stats don’t highlight this. First, many are marrying later if they are marrying at all. Also, the size of a family today is much smaller. So why the need for insane McMansions? The needs are clearly different.

You also see this being reflected in roommate changes. Millennials are more open (obviously) to living with others. But this trend of rooming up is hitting all groups. So this is being driven by necessity and lifestyle choices. For example, a Millennial might be happier living in San Francisco with roommates versus having a McMansion out in Oklahoma.

One way to cut housing costs is to get roommates. An old fashioned solution to the high rental cost situation.

I agree, this whole ‘conservative’ thing is really not working. If we had a more welcoming open border platform, added some more genders, and really ramped up the mass importation of the third world, then things will really start humming! This whole ‘free-market’ thing really is an abomination. But I don’t have to tell you, the crusty old barn owl Bobby has ‘seen it all before.’ Maybe your Oprah can help redistribute the wealth so that the racist white land barons finally stop micro-aggressing their tenants.

Oprah for President lol.. today’s comedy post. A racist, white-hating, filthy rich elite DEMONcrat – oh yeah we really could do better with her in office ROFL.

That aside, over the past few years I’ve noticed the single family homes in my neighborhood moving more adults in, cars everywhere, adults with small kids, single adults, all living with grandma and grandpa. Probably 40% of the houses here have multiple families living there now. A few have (illegally) converted their garages to bedrooms.

I guess since property prices have DOUBLED since the crash in this area (Eastern subs of Sacramento) – surpassing peak prices of 2005, and rent for a 1 bed apartment is $1500, and 2 beds renting for $2000+ a month….

nor cal fella: “If we had a more welcoming open border platform … and really ramped up the mass importation of the third world, then things will really start humming! This whole ‘free-market’ thing really is an abomination.”

Your confused sarcasm is contradictory. It sounds like you oppose open borders, yet want a “free market.” But a free market demands open borders (and more Third World immigration).

America’s problems were made by both conservative/libertarians and socialists. I was a libertarian, long ago. But not for some years now.

I liked Trump’s original message. Populism, nationalism, America First. Close the borders, protect U.S. industries, tax and spending policies to benefit America’s working and middles classes, and no military or financial support to any foreign nations (and that includes our “special relationship” with Israel).

Unfortunately, Trump has increased support for Israel. He’s rattling the saber at Iran. He’s lavishly supporting Wall Street. And the wall is yet to be built.

“No business which depends for existence on paying less than living wages to its workers has any right to continue in this country.” (1933, Statement on National Industrial Recovery Act) – FDR

FDR saw the need to pay a living wage to prevent the US from becoming a third world country where people live in tents/shacks without running water or sanitation.
People are being forced to pack multiple people into tiny crapshacks because their wages are too low to afford a livable home while their corporation is using all profits for multi-million dollar stock buy-backs and CEO bonuses.

“Do not let any calamity-howling executive with an income of $1,000 a day, who has been turning his employees over to the Government relief rolls in order to preserve his company’s undistributed reserves, tell you – using his stockholders’ money to pay the postage for his personal opinions — tell you that a wage of $11.00 a week is going to have a disastrous effect on all American industry.” (1938, Fireside Chat, the night before signing the Fair Labor Standards Act that instituted the federal minimum wage)

You can see how we have seen this all before. We then elected a Socialist for 16 years.

Cal girl,
“That aside, over the past few years I’ve noticed the single family homes in my neighborhood moving more adults in, cars everywhere, adults with small kids, single adults, all living with grandma and grandpa. Probably 40% of the houses here have multiple families living there now. A few have (illegally) converted their garages to bedrooms.”

I am seeing the same here. There is no more parking available. People park across the street at the grocery store overnight. People who have lived in this are for decades told me they have never seen it that bad in their life time. It’s a good sign. People found ways to survive this severe housing bubble. As soon as house prices crash by 50-70% people can move out and buy homes.

What a blame and excuse ridden typical Californian! It’s always someone else’s fault … you take no responsibility. Your State is chasing away the middle class! Your State has a 20% poverty rate! Your State has its own debt that will crush it! Your State has the bulk of the nations homeless! Perhaps you ought to look in the mirror and at your own State before you try to blame everyone else and conservatives for your problems. Conservatives haven’t been in charge in California for years …

“Trump had a lot of promises to fix this. After a year, I still see tents”

That really is laugh out loud funny. And odd in that you crying that trump has had a year to fix this? Fix what exactly? What Obama created OR what Obama himself failed to “fix” after 8 years?

We have corporate rule in the USA it’s not right/left policies per se that are driving the country into the dirt. It’s laws and regulations written by and for corporations that is destroying the nation. One needs to look no further than the ACA, written for and by insurance companies. The hate party (AKA democrats) has this obsession with equating “insurance” with heath care…..insurance isn’t health care…..but I digress.

There is no money left for the middle class and it’s dying and will be gone in another 20 years. You best all learn Spanish since your caregiver in the old folks home will not speak one lick of English.

And if the rumors are true and Oprah does run in 2020 she WILL WIN and that will be game over.

Interesting, don’t scare us with Oprah – it’s not Halloween yet. I’m still traumatized by 8 years of Barry and you already started with Oprah?!?!…Please, I need some time to recover from 8 stressful years.

Democrats are the “hate party”? WTF are you talking about? Racist, plain and simple. Are you scared that people who don’t speak English are taking your jobs? Well, they are, because they work hard and value education. You are a lazy, entitled, little baby, who thinks because you were born here that something is owed to you. It is not.

Better start learning Spanish? Maybe you should, but you are too lazy and dumb to actually improve yourself so you whine online hoping to quiet the voice in your head that whispers quietly to you every day that “you are a failure”.

I started working when I was 12, got 2 scholarships so my school was not only paid for, but I actually made money going to school. I am not scared by immigration, because I am smart and hard working and can compete with anyone, American or not. America was founded by immigrants and if this bothers you, maybe you should be the one leaving the country. Oh, but where would you go? You can’t speak another language and would not be able to humble yourself to learning a new culture. You are on a sinking ship and you are slowly realizing, in your own sad way, that you cannot compete. I only want the best and brightest in America. If they come from another country, we should welcome them with open arms. They have dreams of success just like everyone else.

Maybe you should have worked harder in school. There is still time to learn, but you will not. You will post sarcastic and thinly veiled racist comments online…and that is all you will ever do. All you will ever be.

I always laugh at this notion that America was founded by immigrants stated by DumpTrump. The British and French colonized North America, many generations followed and we declared Independence from England and CREATED America. America was created by and for Americans not immigrants, later on in our history we allowed immigrants to come to this country but it was founded by them, but that was also during a time when an immigrant had no social safety net or any free anything, if you came here you had to make it or starve and the police in the cities were not too nice and the jails were one step above a medieval dungeon, America had debtor’s prisons up until 1833. I am fine going back to old immigration system with open boarders and no social safety net, not even free public education or emergency room access, but I think most people would not want that, and I am pretty sure the current batch legal and illegal immigrants would not want that either. I agree with DumpTrump in one aspect, Americans are lazy when it comes to education, we really need to dial up our education system to 11 and if kids cant keep up then the parents need to step up and supplement to keep the kid up to par, but I am pretty sure La Raza and the teachers union wont be happy with that, because they want schools to be mini-socialist paradises were kids get free lunches, counseling, day care, vaccinations, etc. In Asia, kids in 7th grade are taking Algebra, we start it at freshman year, we really need to up our game in America.

2 Years ago I would have laughed about Oprah. Now… considering we have never had anyone in the role that is dumber or more inexperienced, you have to take her seriously…

If you are upset or laughing about Oprah because you think he has no business running for or being president then you know exactly how a little over half the country feels about our current president.

As a registered democrat I will do my part to not vote for fucking Oprah in any primary ever. But given the rights capacity to vote for a jackass, I have no more faith in the left voter base to not swoon over a left wing shit choice for president………

I expect no president to un-fuck the California housing market. That is our states problem and I expect many more decades of failure given that’s what the home owners of this state want. Fight any potential good law that might fuck up our property value or tax shelters….

The liberals/democrats/collectivists claim that corporations are evil and they are the party which support the middle class. That is what they CLAIM.

Now, the open border policy and massive immigration that they support is clearly decimating the middle class and help those “evil capitalist” who own those corporations. So, what they say and what they practice is totally opposite – HYPOCRITES. The republicans at least are honest and say that they want to help those small businesses. By helping them, they help the middle class to find jobs and they help the economy.

There are lots of these types of examples.

…and, no Dumpy, we are not afraid to compete with you even if we are conservatives white males. Unlike your stereotype learned from MSM, we do have perfect teeth, high level of education (doctors, engineers and business owners) even if we are “deplorables”. I have an MBA and decades of owning my own company through booms and busts and I can drive you circles in business. I am a self made multimillionaire, way above the middle class, but what I have does not change what I am saying about the middle class.

Trump was and still is right in what he says about open borders and immigration regardless if you or I like him or not.

So, you can get down from your high horse and learn something if you have an IQ above room temperature. It looks like you are not fool enough till you tell everyone on this blog that your logic is lacking.

Oprah will not win. Now that she’s been suggested for the Dem ticket, she is being subjected to a lot more scrutiny than she would ever be as merely a popular entertainer, and even the most left-leaning liberals are expressing their doubts about a woman who has built her vast fortune on retailing occult bullshit, magical thinking, and medical quackery. I was not aware of all this because I’m not a TV watcher, having viewed her show only once, at a friend’s home. But now that I see, my previous admiration for this talented business woman has faded and I’m beginning to dislike her, as are many liberal women. If she can win that crowd, she has nobody, because she totally loses it with conservatives, and most men.

This number is likely much higher! I’ve talked to several people who find out months if not a lot later that they pennants sub-let rooms out, let their ‘south of the border’ family squeeze into the ‘pad’, etc.! I’d bet there are a lot of slum lords in places like L.A. that don’t much care and look the other way as long as the rent is paid! Also, it is embarrassing how dumb people play politics on this site. Get a clue … you despise Trump for being rich, privileged, and out-of-touch! Oprah is a billionaire, surrounded by her entourage! All those cheering her on at the Golden Globes are self-centered elitists who have small fortunes, who live in the City with the largest homeless population! I don’t see them opening their wallets!!!! Get a clue!

Heh. You’re 100% correct. The same dimwits who whine that Trump is a billionaire are orgasmic at the thought of Oprah or Mark Cuban running. Liberalism is a mental disease and it is proven over and over.

Dumpy Pants spends his unemployed days spewing hate towards conservatives, and reading Occupy Democrats on Facebook. I’ve never met a liberal who hasn’t had a history of mental health problems, and I suspect Dumpy Pants slides right into that group.

Contrary to Dumpy Pant’s “facts” he gleaned from Occupy Democrats or CNN, every person I know that is on welfare or “disability” is a liberal, who like Dumpy Pants, spends their days vomiting MSM drivel in the hope it may ease his (it?) frustrations that HITlery lost and Trump is implementing WELFARE REFORM and deportation of all of those “best and brightest” “victims” lol.

If nothing else, morons like Dumpy Pants, or “ranger one” or whoever it’s schizo mind wants to be in the moment, provide endless amusement for conservatives after a long day of work.

Where do all you right wing turds go when you are done spending half your day here? Breitbart? Trump is a billionaire? Let’s see those tax returns. The right leaning Rasmussen poll has Oprah clobbering the man/child that somehow slipped into that office. One thing is sure, there are enough of you dimwits left to elect that shithead again. Flyover – damn you are one self agrandizing liar. I come here one every two months and as certain as the sun irises there you are with your phony story of self made riches. Get a job and get off the blogs you are soooo booooring.

Where do all you right wing turds go when you are done spending half your day here? Breitbart? Trump is a billionaire? Let’s see those tax returns. The right leaning Rasmussen poll has Oprah clobbering the man/child that somehow slipped into that office. One thing is sure, there are enough of you dimwits left to elect that shithead again. Flyover – damn you are one self agrandizing liar. I come here one every two months and as certain as the sun irises there you are with your phony story of self made riches. Get a job and get off the blogs you are soooo booooring. And landlord
Old same you. What a broken record bullshit spewer..

Jim, I believe that homes in Southern California have become so unaffordable that prices can only go one way–down. There are no longer enough investors/flippers who can or want to buy–and they were the last buyers. The only question unanswered is how far will prices fall and will any of us have the money to buy real estate at the bottom? These are scary times.

falconator, this is absolutely true. Buying a home for yourself (as long as you have additional cash flow for savings) is a very good insulator against a speculative nature of everything else. But one does need those $$$ from rental parity to invest, then that person is truly not in a position to buy a home

Lol, another joker who bought high. It’s too funny that people who buy HIGH hang out on a Housing BUBBLE forum trying to convince us that now is a good time to
Buy this overpriced crapshack!! I love when they say “I am Up” as if these sky high prices were locked in. During the next crash all that artificial appreciating will just vaporize. Sine the downturn is on the horizon these bag holders are telling potential buyers on bubble forums to buy into this bubble in a pathetic attempt to keep the bubble going for a bit longer.

Good article Dr. HB
“As we have noted, much of the new housing construction is catering to the new needs of Millennials which is rental apartments or condos which are glorified apartments with mortgages. Sure, you have some Millennials wanting to be Taco Tuesday baby boomers version 2.0 but the stats don’t highlight this. First, many are marrying later if they are marrying at all. Also, the size of a family today is much smaller. So why the need for insane McMansions? The needs are clearly different.”

Sooo weird, the RE experts on this blog JT and Mr Landlord just told all of us in a previous thread how millennials are buying houses en mass. In fact, per JT, the remaining ones that haven’t bought are soooo close to buying. Overnight they saved for a down payment. Wondering on which websites they got their news from or if it’s a special sense that only RE experts have? Both, JT and Mr Landlord are way ahead of the media. Fascinating!

I didn’t tell you. I linked to a study done by USC that said millenials are buying houses. Now remember, just because you and your loser friends are living at home with mom and dad, doesn’t mean everyone else in your age group is doing the same.

You have to remember CA is not a part of the US anymore. It is a quasi-independent 3rd World state. You would be very foolish to assume that what happens in SF or LA is also happening in Dallas or Atlanta or St Louis.

I wish I could still live at home. I would save even more than I do as a renter. Not sure why you call this being a loser. I call this being smart. You might remember I live in California. There is no rental parity in California. Every home even crapshack are heavily overpriced. If I would live in Spokane like you I could buy a house in all cash. Yes, don’t worry I won’t move there ;).
Point is, you said millennials are buying homes and I am asking why Have homeownership rates not improved? Don’t worry, it’s a rethorical question. Kinda like when you made the statement that ALL techies in California get stock options. I asked you to provide ANY reference. You posted three websites which proved me right. Same will happen with your millennials are buying houses in droves statement. At least you are consistant in Making up BS and providing zero backup.

For the 3rd time **I** didn’t say millennials are buying houses. The data says they are buying houses. Now that’s not to say every single one of you is buying a house. But the trend has shifted from renting to buying. I know you’re not obtuse. So stop pretending to be.

As for stock options, again, you assume everyone is a loser like you. Hint: we’re not. Stock options have many many people very rich. And not just the Bezos and Zuckervergs. Low and mid level employees at Google, Amazon, Facebook, Twitter, etc have all made a lot of money as well.

You live in a weird world of doom and gloom. You need to get out more and meet some new people.

This is fun.
“For the 3rd time **I** didn’t say millennials are buying houses. The data says they are buying houses.”
Yes you did. Multiple times last year and than just recently this year.

“As for stock options, again, you assume everyone is a loser like you. Hint: we’re not. Stock options have many many people very rich. And not just the Bezos and Zuckervergs. Low and mid level employees at Google, Amazon, Facebook, Twitter, etc have all made a lot of money as well.”
Don’t change your story. It was one of my favorite discussions….”every tech worker is getting stock options.”

“You live in a weird world of doom and gloom. You need to get out more and meet some new people.“
Where Is the doom and gloom you are referring to? I am profiting from this market (stock market/crypto gains).

And why am I a loser for having cash and waiting on the sidelines for a crash? Are you calling all cash investors losers? Is warren buffet a loser for saying buy low sell high and be greedy when others are fearful?

Focusing on the extremes of doom and gloom, you miss all the great opportunities in between. Millennials are unfortunately too shell shocked to strike their own opportunity. Still see adulthood a ways away. Might as well figure them as delayed adults. As an employer best too look somewhere else, if and when possible.

Millennial,
Have you determined the opportunity cost for you choice to rent rather than buy? Have you compared you net worth after years of renting to what it would be if you’d bought a home/condo at the point when you had enough $ for the down payment?
I’d be interested to see the numbers for the years you’ve rented vs the numbers if you’d bought an equivalent home/condo/apartment to what you’ve been living in.

Jeff, I can easily answer that question. Instead of buying a condo in 2014 I invested a large junk of money (stocks and crypto). My monthly payment are 700 less by renting compared to buying. That 700 is also going towards crypto (and savings). Not in my wildest dreams would I have expected these gains from BTC, ETH, LTC and recently XRP, ADA. You probably don’t know what any of that means. Let me just tell you that the housing market did not go up by thousand of percentages from 2014 to 2017…..
That entire time I sat on cash, had no taxes, hoa’s, closing fees and all the other stuff you have to pay as a homeowner. There is not even a comparison. I won biggly by investing it versus tieing it up in an overpriced condo. I totally understand that older folks have a hard time even understanding what’s going on. All they know is buying real estate. 30 years ago there was no internet. People could not research within a few mouse clicks. A ton of older people have that stone age mindset that it is always a good idea to buy. The tools millennials grow up with is a huge advantage that has a tremendous financial benefit.

Gen-x,
I have no idea what the hell you are talking about. What doom and gloom?? It’s called cycles. You never took a economy or business course in school? As far as millennials in business goes I agree with you. I have been very successful in my career however I agree that the attitude of some millennials is rather undesirable. I believe you have to pay your dues. I don’t like the trend of job hopping. While I received 4 promotions since I started with the same company I have seen many younger employees jumping from one company to the next. The grass is not always greener somewhere else. Every challenge you face is also an opportunity.

Jeff, I can answer that for him. The answer is no, he doesn’t do math, ever, only pays attention to what is happening in his own home, and only chooses the data that suits his ideology – rent hasn’t gone up, therefore nobody’s rent has gone up. He hasn’t bought a home, therefore millennials aren’t buying homes anywhere. Prices went down 50-70% in the most undesirable areas last time, therefore prices will come down 50-70% in the most desirable areas next time. There’s a bubble where he lives, therefore there’s a bubble in the entire country. He has never seen a median price chart, and in fact won’t even acknowledge that they exist.

Jeff you cannot argue with this Millennial guy, he will win every time because he is a seasoned investor and financial expert. Not buying real estate is a fantastic strategy. All the savvy investors I know who have achieved high net worth steer clear of real estate and rent. Millennial is probably renting one of my properties from me without me even knowing it. Probably has wallpapered the place with $100 bills with all his amazing investment profits.

“The answer is no, he doesn’t do math, ever,”
That is too funny, coming from the guy who bought high, who thinks it’s ALWAYS a good time to buy a home, who said a house is NOT an investment AND who thinks we have rental parity in California. Hilarious! That’s why I live this blog so much for the entertainment.

“and only chooses the data that suits his ideology – rent hasn’t gone up, therefore nobody’s rent has gone up.”
Almost correct. In my area rents have barely moved. I never had a rent increase. My landlord is giving me a gift. You should rent from s private landlord build a good trus-relationship and avoid professionally managed properties. Chances are good that if you are a good renter your landlord will be good to you as well.

“He hasn’t bought a home, therefore millennials aren’t buying homes anywhere.”
I don’t understand that logic. I don’t think I can influence the market like that. That would be a truly amazing power. I think what you are trying to say is that I don’t believe this is he year millennials will go out and buy in droves. We have heard that for the last three years and I think it’s too funny that it comes up again and again. And sometimes you even hear that millennials waste their money with 10 dollar Avocado toast and Starbucks coffee. As if you could save 200k down payment if you stop eating avocado toast and Starbucks coffee. So, yes, I will continue to make fun of people who post that this is the year when millennials go out and buy in droves.

“Prices went down 50-70% in the most undesirable areas last time, therefore prices will come down 50-70% in the most desirable areas next time.”
Yes. 100% agree. It’s just a matter of when. You see the same pattern. Dumb money invests in what goes up and rushes in at the top and panic when it goes down.

“There’s a bubble where he lives, therefore there’s a bubble in the entire country. “
Nope on that one. Yes, there is an enormous bubble in California. That’s where I live and that’s where I buy when prices crash. If I were to live in Spokane I would buy as my spreadsheet shows rental parity there. There are many parts of the country where buying makes sense. The issue is there are not high paying jobs and not the same conditions I have here in SoCal. Plus my family and relatives live here.

“He has never seen a median price chart, and in fact won’t even acknowledge that they exist.”
Nope on that one. Not sure why you think that but okay. Whatever makes you feel better.

Cute post falconator. “Not buying real estate is a fantastic strategy. “
Who says I am not buying? I just wait until it crashes. I buy low not high. Every bubble needs dumb money who buys in at he top. Every bubble needs bag holders (you are a genius)

“That is too funny, coming from the guy who bought high, who thinks it’s ALWAYS a good time to buy a home, who said a house is NOT an investment AND who thinks we have rental parity in California. Hilarious! That’s why I live this blog so much for the entertainment.”

You do know that other people who read this blog actually comprehend what I write, so you trying to put words in my mouth doesn’t work? You’re only fooling yourself. I never said it’s always a good time to buy. I’ll try to make this as clear as I can – I said that SOME PEOPLE (including me) don’t consider a PRIMARY to be an investment. Our definitions of rental parity differ (mine includes all the benefits for the very long term, yours doesn’t go past the down payment and first month’s mortgage), so there is no point in rehashing that.

“Almost correct. In my area rents have barely moved. I never had a rent increase. My landlord is giving me a gift. You should rent from s private landlord build a good trus-relationship and avoid professionally managed properties. Chances are good that if you are a good renter your landlord will be good to you as well.”

What you think about landlord/tenant relations is not the point. The point was that literally dozens of times, you have stated that “rents haven’t gone up.” The entire internet and all the data available disagrees with that statement.

“Prices went down 50-70% in the most undesirable areas last time, therefore prices will come down 50-70% in the most desirable areas next time.”
“Yes. 100% agree. It’s just a matter of when. You see the same pattern. Dumb money invests in what goes up and rushes in at the top and panic when it goes down.”

I don’t think you read that correctly. What I wrote is a completely illogical and sarcastic statement. The only pattern here is that prices don’t drop as far on the coast.

“There’s a bubble where he lives, therefore there’s a bubble in the entire country. “
Nope on that one. Yes, there is an enormous bubble in California. That’s where I live and that’s where I buy when prices crash. If I were to live in Spokane I would buy as my spreadsheet shows rental parity there. There are many parts of the country where buying makes sense.”

That’s the first time I’ve seen you admit that. Bravo!

“He has never seen a median price chart, and in fact won’t even acknowledge that they exist.”
Nope on that one. Not sure why you think that but okay. Whatever makes you feel better.

Because you refuse to see that coastal prices hold up far better than inland prices. You’re expecting a coastal drop that won’t happen.

Millennial, you and your rental parity :).
Ok, 1mln dollar home rent = 4k, PITI = 5k. -1k rental parity. To make rental parity match, PITI must drop by 1k, which is around 200k in price on 30 year mtg (If interest rate increase or 15year mtg, 200k will be smaller). 200k is 20% correction, with even rental parity. Now, tell me where is additional 30%-50% will come from. Do you anticipate negative rental parity or rentals dropping by 33%? Please tell me why would anyone sell you a home (especially in a nice are) for 50% discount?
So far, you have not posted any thought supporting your crash prediction.

Millennial,
Waiting for a crash is a valid strategy, as long as you realize that it is a speculative strat fff
If you buy home for youself for a longer time frame (even at a relative peak) enables to significantly reduce speculative component of this game.
But the rationale and reasons that you are citing are completely off-base.
1st – yes, there is no rental parity. But, the amount you save by renting will not get you far. 1mln dollar home in Cali can be rented for 4k, and bought for 5k PITI. 1k/month – 60k/5 year, which is only 6% contribution to the price (assuming all is flat). With your targeted 50% drop -> it is only 12% of contribution over 5 years. You might have additional savings, but amount saved due to rental parity is really insignificant. (And this is before tax deduction and not ignoring the fact that principal portion is paid to reduce debt).
2nd – You mentioned crypto currencies. Sure, the run was good. However, considered environment where homes drop by 50% (heck even 20%). This will most likely be due to liquidity (in $$) crisis. $$ crisis will most likely cause stocks/crypto to drop like hell.
3rd – this time around there is a broad asset high valuation. In 2006 it was heavily concentrated on real estate, with MBOs linking the weakness of RE into the stock market. This time around, all assets are priced high and risk is systemic across the board.

What you do not understand is that thing like a House is a practically always a leveraged purchase. In fact, everything you buy it takes you that much long to save for (or pay for if financed). Car – typical lifetime 8 years, either you save for 8 years or you finance and pay for 8 years, either way it takes around 1 use timelife of a product to acquire. House – you live in it for 40 years, so it will either take you 40 years to pay for (10 years save for downpayment, 30 years mortgage).
This is for average person within his base. Of course, there is small percentage of people who do much better because they earn more while live below their earning means.
But nobody can save for a house just from rental parity. Even with 50% crash.

Renting versus buying had paid massively for me surge. I think what you don’t understand is how much more you are paying compared to someone who waited three years and saved 30% of the purchase price. You can tell me all day long how buying now is a good idea. I could have never invested and gained that much money with in the last few years if I would have bought. It’s freakin simple math. All I have to do is look at my bank account and my investment accounts. I feel like you have to somehow tell yourself buying an overpriced house was somehow the right move for you. It would just hurt too much to admit how much a renter wins by investing the savings instead of tieing up the money in an overpriced crap box.

To expand on your numbers Surge, I can provide first person details…I’m in coastal San Diego renting and on the fence about buying. After running the numbers, buying = out of pocket additional ~$500/mnth vs. renting, principal payment of $1k/mnth on mortgage. This is with 20% down payment invested in interest accounts/bonds factored for renting (minimal return rate). So, you can see it’s far from cut and dry for someone like me, a typical potential buyer in the area. I do appreciate all the different perspectives on this blog…lots of food for thought!

Roble,
Not clear are you saying you will pay extra $550/month or extra $1500/month if you buy compared to renting (assuming roughly the same time of dwelling).
In my opinion, ~1000k/month extra (before tax break and principal) is not that much, given that I have additional much higher savings rate / month. If you save for 3 years, that 1k/month ~36000. In context of home prices, it is nothing. Yes, you can invest the savings, but you need to get very lucky. You might need to wait to save for 20% DPT (assuming you do not have it yet). My point is rental parity is over-rated, 700$/month will not get you far. It is practically is a wash. If you feel that it is not a wash (meaning you will not have additional savings if you spend extra 1k / month), then you are probably not ready to buy. You can also wait for price drops, but then you are in speculation. Buying a crypto/stocks instead – you are in speculation. Your saved DPT will not yield much, or you have to go high risk (stocks/crypto, equally inflated assets).

Millenial, you tout you won big by investing in crypto currencies, etc…
This is all great, the only issue is that it is (as you definitely know assuming you truly do what you say you do) is highly speculative and does not differ much from housing bubble in 2006. If you truly invested in BTC/Crypto in the manner you say, you are millionaire by now (in USD) and the whole discussion about mortgages/buying home should be a moot point for you.

Surge, you are absolutely right! Buying now would not be an issue. I plan on buying here in SoCal as soon as it dips. I don’t disclosure actual numbers and I fully expect that the crypto bubble ends in tears. I take profits and try no to get greedy.

Yeah if you got cash, waiting will pay off as only really cash buyers will benefit from your target 50-70% crash. Investing 4-5 years ago in prime real estate would be a fantastic leverage play, I would even argue more fantastic than scooping up crypto at 700$/month (not sure about the numbers though)
Most others will not benefit from such a crash. Long term buyers wil not be impacted (as long as economy does not crash and burn, but then everyone is screwed)
I really want to see lots of people selling you at 50% discount in prime areas. Only highly leveraged will do it, but then it is pretty much a walk and you are dealing with banks. You just do not understand the event that is needed for 50% crash in prime real estate in So.Cal.

Surge, I am more than happy to share some details of my purchase when we see the market crash down. There is no need to buy unless we see a 50-70% crash. Renting is much cheaper. FYI, when foreclosure rates go up it does not matter what the owner wants or does not want. When you buy overpriced crapshacks and lose your job and can’t make the payments the house is gone. Maybe another fact you don’t understand is that you don’t own anything unless it’s paid off…. so saying nobody wants to sell you a house at a discount is a laughable statement.

Millennial, here is why 50% discount is highly unlikely, barring a catastrophe…(in which case who cares)

Yes, job loss is a risk for a homeowner, especially recent one, and that person might be forced to sell, but..

If someone has 20% down in equity and has to sell…anything over 20% discount and you are effectively dealing with a bank (because beyond 20% they are selling home that is underwater and they practically walk/short sell). Bank will go only so far, they will not give up remaining 30% of their loan.

If someone is 50%+ in equity and has to sell… do you think they will give up all their equity for your 50% discount? They will do anything (rent,etc…) to keep it going. Very tough for someone to accumulate 50% of equity just to give it up. I find it implausible that someone with 50% in equity will just lose his home to a bank (which in turn sell for 50% discount just to recover its end).

If someone is 3% in equity..well, if they have to sell at any discount they are practically walking and you are dealing with the bank.

The only ones that I see will sell at 50% discount might be fully paid off homes that will buy similar home at parity. But these are unlikely to be “forced” to sell.

As you can see, 50% discount is highly unlikely. 20%-25% seems to be a hard boundary in prime areas…at 20%-25% recent buyers might get wiped out, but beyond that resistance to sell is very high, even if faced with job loss. This is why in last crash prime areas losses were no more than 20-30%. Crappy areas did get hit with much larger

A more plausible scenario is flat market or maybe 10% dip for several years while inflation catches up with ownership cost

Surge, I am still not buying until we have a 50-70% crash. My rent is much cheaper compared to buying. Unless my rent is going up by a LOT or unless the RE market crashes there is simply no reason to buy. I much rather take the extra cash I am saving, put some in the bank and invest the rest. Much more fun, way more flexible in terms of playing the market and it will let me benefit from a crash. If you buy now at the peak your cards are played. You can’t do anything during the crash. You are locked in. Again, it does not matter who wants to sell or not…..the bank ownes the house unless you paid it off and own it outright. A buyer who bought sky high and loses his job will most likely lose the house as well. We had 7 mio foreclosure during the last crash. You want to tell us that all of these 7 mio “allowed” or “ok’d” the sale at a huge discount? If you can’t pay for the house anymore your emotions or plans do not matter at all. That’s what a foreclosure is. Let’s see how many millions of foreclosures we will get this time around.

This article is just another reminder that we are in a race to the bottom as living standards decline and the middle class disappears we are becoming a third world two class society of the obscenely rich and the obscenely poor. Open borders and a huge influx of low-skilled immigrants has only compounded the problem especially in CA where it’s common to see overcrowding and carmageddon on a daily basis . This didn’t start with Obama and it won’t end with Trump.

My house always had a furnished studio rental attached that has been occupied with a tenant for years now. The tenant pays 2/3 of the mortgage. Recently I divided up the 2200 sf so the place is now a triplex. The two rentals have full baths and kitchens, my unit has a fridge and microwave. I also have a detached two car garage with a shop for any stuff that doesn’t fit in my little unit.

It was time to adapt to a new America, so I did. I have everything I need and can save $2k a month. Without the triplex, I haven’t a clue how I would ever get ahead. I could make the mortgage payment on my own, but couldn’t save a dime without tenants.

Yes, this is normal. My first condo I always rented out the room, which covered 1/3 of expenses. I was single and it was absolute norm, no need to have a place all to yourself if you are starting out. I planned it out like this and it did help to get ahead and pay bunch of student loans, etc… 3 bedroom is even better, if you are ok with a crowd. You are getting ahead on both fronts: Equity accumulation and extra cash every month. If you did not own, chances are you would probably still have roommates. There is time for everything.

The bulk of the new apartments being built in LA are luxury apartments with high rents. They offer one parking space for two and three bedroom apartments because brilliant developers assume millennials will just Uber everywhere. Unfortunately that is absolutely delusional. What happens is those big priced apartments contain 2-3 roommates and their boyfriends and girlfriends and they end up parking where ever is possible: sidewalks, redzones, front yards. Developers need to offer a parking spot per bedroom or be denied a permit to build.

Is that developers or the city forcing them to only have 1 parking spot? In Seattle, the city has been making a big push to reduce the number of parking spots available. The city’s stated goal is the eventual elimination of all cars in the city.

Eliminating cars is a good thing! I hope my 3 year old daughter never has to get a driver license like I have today. Hopefully she can hail a self-driving car with tons of safety features and have it take her anywhere for a similar price to owning a vehicle.. with the added benefit of no storage or maintenance necessary. Cities always are on the forefront of the future. Why so much hate toward cities phasing out taking up space with everyone’s personal vehicles that sit around 90% of the day unused.

Sort of like Skid Row, in that bastion of liberalism known as Los Angeles?

But yes, it will eventually happen in some places, after electric cars become the norm. California will help the process along by raising gas taxes so high that most people start buying electric, but the roads will continue going to shit, so they’ll need to enact a mileage tax on everyone, which they will promptly spend on insolvent teachers’ pension funds. Even some gearheads will realize that many all-electric cars are so fast they don’t need that flat-plane crank V8 anymore, and go to the dark side of silent running. They will be mocked by the rest of us even as we lose to them in drag races. Uber and Lyft drivers will be out of a job. Internal combustion engines will be outlawed in LA and SF first, maybe around the same time (20 years?) that human drivers are outlawed. First responders will have the only vehicles with steering wheels. Gas stations will be specialty shops only found near race tracks, which will eventually be the only places a real, living motor is allowed to run. Towed there by a self-driving truck, of course.

yadda, great suggestion about requiring one parking space per bedroom. What you forget is overregulated Southern California never requires logical building requirements. They instead will require solar panels, dual pane windows and sprinkler systems in every unit. Why? The global warming hoax!

Up here in desirable parts of the Bay Area single bedrooms are renting for an average of $1,500 and of course in SF city limits probably like $3,000 haha! And to make matters worse most of the ads have all kinds of landlord/roommate Nazis charging $1,300-1,800 for a bedroom and then saying No guests, No drinking, No pets, No whatever! And many people even state that the renter had to be out of the house at certain hours or they would prefer you to not be there during the day. It’s just horrible, anyone looking to laugh and/or be disgusted look at the rooms for rent ads on Craigslist for San Mateo county. I feel blessed to rent a mediocre crapshack for $3,500 a month, at least I can do whatever I want to and be home on a rainy day. Looking at not just the absurd prices in SF and parts of LA/OC and the shortage of housing which is already bad enough the conditions for many rentals are Nazi-esque and the housing is in such high demand many people will walk on eggshells and sacrifice many things to rent a $1,500 a month bedroom from somebody.

Needless to say, if you were a landlord you would do exactly the same thing.
But because you call someone nazi-landlord is exactly a part of your mindset which prevents you from becoming one (a landlord)

Bbbbut bbbbut California is the 5th largest economy and it’s also where also the best and brightest work and stuff!!! LOL. Yes the best and brightest, working 60 hours a week, in the 5th largest economy in the world, to be able to sleep on a couch with 3 other roommates in a 2 bedroom apartment.

But at least they can walk to 17 Somalian restaurants, so they have that going for them……

LOL, ’bout sums it up. Cali is just TOO CROWDED. Whatever the California Dream was (1950-1980) is long gone. Replaced by Japanese style accommodations and working hours. There are of course folks who create and enjoy immense wealth here, but what’s the point if all you can do at the end of your 14 hour day is collapse into your $50,000 bed?

‘Somali’ restaurants not ‘Somalian.’ Have some cultural sensitivity Mr. Landlord!!!!!!! Your white privilege is on full display!!!!

These are the sacred third worlders that our country is ushering in..the ones that have gentrified Europe and made it so livable and diverse now. It is critical that we use the proper nomenclature so that your micro-aggressions do not make them feel unsafe.

NorCal, the US needs all the third worlders it can get – it’s continuing development, excellence and improvement of the middle class living conditions needs those like air – according to DumpyPanty. Someone has to be a special type of idiot to believe the talking points of the democrat/liberal masters and you can not fix stupid. They will continue with their pussy hats and crying at the sky for the next 7 years.

Oh good God. I said Somalian. I am LITERALLY worse than Hitler, aren’t I? I officially denounce myself. LOL.

But fair enough, I should have said Somali. Although I didn’t mean anything in reference specifically to Somalis. Could have been Asian fusion or Avocado Sandwich Shop or GMO free Vegan Bistro or whatever. The “best and brightest” work like dogs, live in 3rd world conditions, all for the “benefit” of having multiple overpriced pretentious restaurants within walking distance.

Maybe “a chicken in every pot and a car in every garage” was a good enough aspiration for the economy of the Roaring 20’s, but it looks like 2018 campaign slogan for the new millennium should be modified to “convenient, tasty food delivered to every doorstep and multiple hybrid/electric cars in every garage.”

That would be a politics of hope at least. Instead, we have politics based on imaginary fears–the Russians or North Koreans are coming, the terrorist are going to kill us all, global warming will destroy the earth in 5 years, 10 years, etc.

“Small-business confidence hit a record high in 2017, according to the National Federation of Independent Businesses. The National Federation of Independent Businesses on Tuesday released its Small Business Optimism Index for, capping “an all-time record setter” of a year in 2017, according to the right-leaning lobbying group. The optimism index came in at 104.9 in December. According to the NFIB, the index’s average monthly level was 104.8 in 2017, the highest in the history of the the survey.”

Mr. Landlord, I will eat crow if these fake economy lasts until the election. The prosperity you hear about is all fake news based on manipulated government statistic. The backbone of the economy, the middle class, is going broke on borrowed money The economy will be lucky to avoid a recession until after the election. We have a government which in “good times” is raising 16.4% of the GPD in taxes and is spending 22.4% of the GDP. What will happen to borrowing when the next recession hits.

I think that the FED is preparing Trump to be the “sacrificial lamb” for the coffin of conservatism.

The new FED chief Jerome Powell is “nominated” by Trump just to link Trump to the collapse to be engineered by Powell. He was imposed on Trump and the president unaware just gave his blessing to what Wall Street imposed. The FED can do anything they want regardless of Trump. When they will collapse the economy through QT, I just hope against any hope that Trump will suspend the business license to this cabal of international financiers. I know; I am daydreaming – wishful thinking. In regard to QT I am not dreaming; it is happening.

You have fallen into the trap of thinking Obama’s 8 years of depression is the new norm. It isn’t. Those 8 years were an aberration. 2017 was just getting out of the Obama depression. 2018-202? will be the real boom.

It’s also kind of sad that you’d rather have the entire country suffer economically than admit Trump is doing a good job.

Flyover, I’m with you 100%. The deep state/Fed will lop Trump’s head off soon and he will indeed be a ‘sacrificial lamb.’ This economy will not last through is first term. He has now owned the bubble and will be blamed for its burst. He should have stuck to calling it a bubble like he did on the campaign trail. Socialism will be ushered in after this collapse because people will say, ‘look, trump’s conservatives failed us, give us our nanny state and bring in the the 3rd world.’ That is what will happen here. I think it’s obvious.

The fed can only do so much, raising rates slowly and reversing QE. Trump realizes (((they))) will try and pull the economic “rug” out from under him so he’s no doubt already got a plan to hang them. We should have had lots of people go to jail in 2008, now with this next downturn we finally have someone in place who will hold people to the law and let DHS, INS, IRS and SEC do their jobs for the first time in 2 decades or more. He can crush the fed, the hedge funds and all the slimy people involved in RE fraud and take their ill gotten gains and redistribute to the people, making him even more popular.

Govinda, I like your talk but I’m afraid it’s just wishful thinking. Sometimes I daydream like you, but these mafioso, by carrot or by stick will have Trump just where they want him. Only the army can still do something but in the last 8 years all top generals were changed.

We live in interesting times and the fight at the very top is still not over. The second guy from WikiLeaks was “suicided” this week. I think he used his nail gun about 150 time at the back of his head or something like that!!…:-)))…I don’t know what is the matter with these successful young tech guys that they “kill” themselves. These days, being a successful tech guy is one of the most dangerous occupations. I think he had too many “goods” on important people.

Yes that’s what MAGA is, tax break for corporations who give out one time bonuses that do not do anything to increase wages. Putting 30% tariffs on solar to kill jobs and kill the renewable energy industry. I am sure you will say yes to bringing back manufacturing but why stop there? Why not all manufacturing not just solar? Why only one sector? To kill renewable and bring back coal? Dumping billions in defense and a border wall (that mexico was to pay for?). Defense is a funny as most of that money goes to contractors who charge 10k for a toilet or 250 for a bolt. Deregulation’s and cutting of environmental rules? I remember seeing some of this in the early 90s before it all went boom in 2000 and 2008. What made it go boom?? Why is this blog in existence?? Yep, lack of oversight in a bubble economy.

At least Millennial has the right formula. Rent cheap, wait out the speculators and get rich quick guys. Pay off any wasted debt and invest in the stock market in a smart and efficient way. Diversify but dont be afraid to be a little aggressive. Since Millennial isnt investing in Real Estate you might as well take advantage of it. Real estate investment window is long gone, yes there are deals still but they are hard to find and now take longer to pay off without being a flipper.

As always, be prepared for the coming crash as it never ever lasts forever. Stay liquid pony boy. lol

Dan@”I guess you need to define “richer” because if that means ending the Trump term with more money in your pocket and making more money than when it began I think the vast majority of America will be richer. I guess it comes down to how much richer. Any small business will reap huge rewards on this 20% deduction for pass-through entities. Also for the Trump will make the rich richer argument that 20% deduction is phased out for a married couple Above 315000 So it seems to me that the lower end of the small business income scale is receiving the large deduction. As I stated in an earlier post I believe the only category that will not see a nice reduction in taxes is the single person with no kids that makes 6 figures and lives in a high tax state.”

Dan, I agree with you. What I meant was that at least 20% will benefit a lot which in itself is far better than Barry’s performance. I am all for helping the small businesses because they are the biggest job creators. The government destroy 3 real jobs for every one created to push papers around and harass the private sector.

I think a much higher percentage than 20% will benefit from the tax plan in addition there are results already coming through the pipeline such as big corporations raising wages and offering employee bonuses. Assuming a Black swan event or QT doesn’t take this economy down, it should really gear up and 4% GDP is attainable.

@interesting

Not sure on the engineer profession, but, there are plenty of professions doing very well. It is not all done and gloom out there.

Lastly, you guys do need to pick an argument because on the one hand you say that these foreign buyers are a myth and then on the other hand you say nobody can truly afford housing these days but then how can who is buying these homes???? Homes are being bought and someone is buying them.

Aren’t you a lender Dan? If sooooo many wealthy buyers are in line to purchase a home how come you are so bored and post all day how awesome the market is? Would it not be be more lucrative for you to do business with all these clients instead of telling all of us we should go out and buy?

Yes I am a lender and I do not post all day, nor do I tell people to go out and buy.

I merely point out that based on what I see, homes are moving and someone is buying them. When you have this type of demand and limited supply (of desirable homes), a crash is unlikely.

Btw; I mainly do conventional and FHA, the 1mil+ market is not my market as that is dominated by the big banks. I actually don’t care which way the market goes, I am in a forever home that is perfect for my family with a payment below what I can afford and have 0 debt (other than said mtg). Buyers are going to buy and life doesn’t just stop.

I also pointed out that I believe the tax cut will put more money into pockets of buyers and may nudge some fence sitters to proceed. As a self employed broker w/ a pass through entity that 20% deduction will come in handy for me personally.

I could be very wrong as I readily admit I was a housing bear in 2012-2015 and was proven wrong every single day. Lastly, I have commended you on your discipline in saving and financial goals, I just disagree that a crash of epic proportions is around the corner, but, if anyone had a crystal ball they’d be living on a private island and not arguing about CA RE.

One side effect of living like Sardines is the epidemic in Flu Cases across California. The Virus likes close living quarters. We may see that 2 Bed 2 Bath for 6 Adults is not enough when the Noro bug hits. Third World Standard Of Living has entered So Cal with Housing Prices way above affordability. Asset prices are inflated. Question is who will be buying these inflated assets tomorrow?

I always ask my older friends “which one of your kids can afford to buy the house you live in” (one friend still has all his kids but 1 living with him….the oldest is 30 something…yes that one is a bit of a loser but daddy lets him be, once again I digress) and I always get the same answer every single time.

“I couldn’t afford to buy the house I live in on my current income”

Mr Landlord likes to tell us that a “professional” couple can easily afford to buy but I don’t know where all those “professionals” are going to come from and how long before all those professional jobs are outsourced as well? My engineering profession was outsourced to China over a decade ago and all I get now is the scraps at the same price I did in 1997…….which is still “decent” money but not enough to buy a house on my own.

I don’t know how this ends but when this bubble does pop and pop it will I think were going to start hearing about a lot of this was once again all based on fraud.

I can’t not compete with a 3rd world worker will to work for $5 an hour. I live in a first world shithole where a starter home costs $700K. the only thing I have going for me is i’m here not 12,000 miles away. At least i’m still in business while many others are not.

The other thing is the trend IS starting to change. Many are getting tired of the absolute junk they are getting back from China so they are doing the engineering work here and forcing china to build to that……which means it’s not so “cheap” anymore.

The buyers in North County San Diego are dual income couples, mostly white collar jobs…they are everywhere. In my circle of friends, the husbands usually make a bit more, salaries in the lower six digits and the wives pull in decent salaries but a bit less on average. These are people with bachelor’s degrees that have been working hard for 20 years give or take, not doctors or lawyers. Those are your buyers – if you look at price affordability index, we are well above 2006. As a home shopper, I would love a price drop, but Trump just juiced the what was already a healthy economy with the tax cuts….don’t see a drop other than black swan anytime soon.

Rents are astronomical. But everyone wants to live in SoCal because….Somali Restaurants and weather and social justice (and none of those icky white people). But even though rents are astronomical and everyone wants to live there, somehow magically real estate values will decrease by 70% in the not too distant future.

Mr. Landlord, prices are not set for desire. They are set by what buyers can afford to pay. Today, buyers are tapped out. Once the investors/flippers/spectaculars start to sell, there will be no one left to buy their “investments.” Prices will go down 25% within 18 months, then the foreclosures will hit the market and the second 25% decline will begin.

CA still has plenty of “icky white people.” As of the last count, we had just under 15 mil. That’s over 3X the amount of icky white people that reside in your state. Yes, the weather is great. We just had a couple days of rain and now back to the 70s. So how’s in the garden of eden AKA Spokane where you live? Looks cold and shitty… every day for months on end.

Amazing… all those icky white people yet you rank right up there with Detroit. A much “darker” town.

And a 19.9% poverty rate in Spokane? Wow! You rank right up there with CA. And no mass illegal population? No Somali restaurants?

People move to CA because it’s promoted in the media, movies, music, etc. It’s the best place in the world *if* you can afford it. I do just fine and so do millions of other people. Trash it all you want with your bigoted comments. Just don’t act like you live in some paradise because you are delusional.

You did not understand our collectivists friends fully. I don’t blame you. Since liberalism is a mental disease and does not have anything to do with logic, I will try to explain it to you the way I heard it from them. It goes like this – if you let the borders open and accept all the millions of illegals, if you pay for all their education and hospital bills, if you give them food stamps and welfare, if you make the whole state a sanctuary state, all of a sudden, the rents drop, house prices drop, the middle class wages will increase because now they have more competition. Also, if they don’t have to use their cars anymore, their standard of living increases, because using public transportation is so much safer and faster than using your own car. Only those white bigots voting for Trump want to use such deplorable objects like cars. They really believe all of this because their gods in Sacramento told them so. Even Hollywood agrees with that. Sarc OFF

If you don’t believe all I stated, you must not have been too long on this blog. They said all of the above and much more. It “feels” just right for them. It doesn’t matter if it makes sense to you and I – white deplorable bigots – what counts is that it “feels” right to them. How those stupid politicians in Sacramento can win in a landslide for decades is beyond me. That till I visit CA once in a while and look in the stores and streets. Then everything start to make sense and when I read this blog then everything comes into focus – a small % of psychopaths manipulating the masses and a third world outside their circle.

Troll- One who posts a deliberately provocative message to a newsgroup or message board with the intention of causing maximum disruption and argument.

Do you spend your other free time trolling on atheist blogs trying to convince people God is real or vice versa?

This is supposed to be a discussion on housing, in CA. You know, for people who live and work here and are impacted. It’s not Breibart.com. Maybe there’s a i-hate-ca blog somewhere. Instead of housing, all I read is you and landlord giving each other virtual handjobs since you both are like-minded.

Let me spell it for you again Bobby since you were not able to understand it the first time.
What I said about open borders and illegal immigration and sanctuary state has EVERYTHING to do with high rents and high prices and overcrowding in SoCal. You did not get it even when I connected the dots for you.

This does not have anything to do with your ramble about Breimbart, God and atheism. There is not even a correlation, forget about causation.

With Landlord I disagree on lots of things but I did not attack him and he did not attack me based on “feelings” like the liberals do. Where we disagree we just “agree to disagree”.

I wish more people would understand this. Supply and Demand. Thousands are not leaving this state for those reasons above. Anywhere you go you have to sacrifice weather! I have been to many states and I would actually move to a few, but I still struggle with the climate in these states.

I am not sure if it been talked about, but many people affording these more expensive homes are just taking their own appreciation/equity to do so. So outside of a few hundred more in taxes, you can afford to buy a more expensive home, one you could not afford 2-3 years ago. (I am not saying this is a good idea, but I see it happending often here in socal)

Anecdotally, I would have a roommate no matter my financial situation, as I don’t want to live alone, I want to reduce my “footprint,” I want to save money, and I’m single. I own my own house in a major city and my roommate splits my mortgage with me.

While I am sure some of this doubling up is by necessity, I don’t think it is a bad thing.

Rather than “reduce your footprint”, how about we reduce the number of feet trampling everything? Would this perhaps be a reason to reduce/curtail legal and illegal immigration in to the USA? Is it something that can/should be done beyond our borders? (see Africa’s ticking population time bomb and get back to me…)

Tell that to our liberal/collectivists friends. According to them “multiculturalism”, “diversity” and open borders increase the standard of living of the middle class, make the available well paying jobs more abundant, make the environment less spoiled and those freeways bumper to bumper make everyone happier.

If you don’t believe me, ask Hillary and all those wearing the pussyhats. There are so much happier now for having CA a sanctuary state. As a result of the wise policies of their savior Obama, rents dropped significantly, house prices are less, medical insurance dropped significantly as a result of Obamacare and the student loans all decreased (that at the same time they paid the tuition for the “dreamers”). The reality does not matter. What counts is how they “feel” even if they end up sleeping in tents….sarc OFF

For those of you that think there is tons of equity and no demand (well qualified buyers); below is an email I just recveived from the agent that represented me on my purchase. It’s a copy/paste-

Hello Everyone.

I am reaching out because I need homes for my buyers. Inventory is low and I have 3 sets of buyer’s ready to purchase now! If you or anyone you know is thinking of selling, here are what my buyers are looking for:

Buyer 1 – looking to purchase a home in Dana Point/San Clemente area. Ocean view a must. 4+ bedrooms, pool, or backyard large enough to install one, bright and open floor plan. Well qualified buyer.

Buyer 3 – looking for a 2 story SFR with a main floor bedroom and 3+ bedrooms upstairs, just about anywhere in Orange County. All cash buyers, 1800 sq. ft. minimum, turnkey.
I very much appreciate your help to spread the word. This year is expected to be a Seller’s market yet again, meaning very low inventory and a multitude of qualified buyers. Therefore, I am doing everything I can to ensure my clients have the best advantage possible

Her email did not indicate buyer #1 was all cash. Said “well qualified buyer” which means there is financing.

I believe only buyer number 3 was all cash.

BTW, not everything and everyone is troll or fake. The cash buyer from Asia is NOT a myth, trust me, I am a lender and my buyers do sometimes get beat it by cash. Whether it’s 500k or 3 mil doesn’t matter, that cash is out there floating around.

Oh please Dan, give us a break with the there-is-no-inventory-myth. A half blind monkey can go on realtor.com and enter any zip code. Pages of pages of houses for sale will pop up. Plus they are building sfh and multi family homes everywhere in California. Nice try pretending there is somehow a shortage of inventory. Prices are sky high and crap shacks are way overpriced. That’s why we have low sales numbers. Nobody in their right mind is going out to buy now except the dumb money.

Just move to SoCal wheelindealin. The trick is to live below your means. Frugal lifestyle, save and invest. Live debt free until the housing market crashes. Happy to share my secrets as I know most people have to keep up with the joneses and waste all their money. They won’t follow my model and hate me for being a debt free individual waiting on the sidelines for a crash.

Millie, when people talk about how hot the current housing market is and predict a tightening market in the near future, you often respond with: “if you believe what your are saying why not go out and buy that next crapshack?” Just because someone does not see the crash on the horizon does not make them wrong, nor does it mean that this moment is a prudent time to buy. You must understand that people’s needs are different. Some people have the luxury to wait, while others may feel pressure from family, living conditions, rental parity, tax situations, etc. It is very difficult to time the market. I know people who got a mortgage in 2006 and overpaid, but are happy because there is no way they would qualify under current mortgage requirements and they know this. IMO there is no bad time to buy a principal residence if you can afford it and see yourself living there for at least 10 years. On the other hand buying income property is a different ballgame completely.

Wheelindealin, Naaaah. Nobody ever HAS to be pressured into buying overpriced crapshacks. It’s pure stupidity. People just don’t know better. People buy at the top of bubbles and get burned. Thats how realtards and lenders make money. Boomers like people who buy high because they bought stocks and Real estate on the cheap side and profit from this bubble That’s how people make money in crypto as well. It would not work without the bag holders. The lesson here is, wait and buy low.

2018 will be another tight market. There is very little inventory and plenty of buyers. This is the quiet before the storm, wait until March and buyers will come out in force like clockwork. The LA economy is booming. As long as this keeps up, there will be no tanking of any kind.

Millie, I’ve been making money hand over fist in the stock market. So when RE pulls back 50-70%, I’ll buy a rental property all cash. I already have a primary residence, so I’m good either way the market goes. Don’t put all your eggs in one basket. Diversification is the key to building wealth.

Nobody is suggesting you go and buy a home. It is always indivudual circumstance
Your position was to invest proceeds from rental parity into crypto. This is fine
But you are promoting undeversified appoach to investment portfolio.
In other words, speculation on all fronts (long crypto and short housing)
While you strategy might have worked for you so far, you do not display comprehension about its risks and limitation. In fact, your behaivor is no different from people buyng RE to get price appreciation.

Surge, you are very wrong. When you buy a house in an overpriced market most of your funds go towards that asset. You are locked in. When the market tanks you can’t move. You don’t want to sell with a loss. If the Re market goes up you cant lock in your profits without selling. If you sell high you have to buy high again. Buying real estate is a terrible investment unless you buy low (during a crash). I am very diversified and flexible. Cash, stocks And crypto. You can take profits in crypto anytime without much fees. You just pay your taxes on it. Try that with a house. The agent takes an enormous profit, closing costs, lender fees etc. that I have to explain basic throngs like that shows me you have little to no clue what you are talking about. I bet you have never utilized a buy versus rent calculator in your life.

LORd B. Hold on a sec. you keep telling us almost daily how we should go out and buy and how this is a great time to buy…..However, you don’t buy yourself because you are waiting for a crash to buy more RE??????? You are telling me we are on the same page the whole time???? Which is it? Buy low or buy high? It seems you just want US to buy high but you yourself don’t want to buy unless it crashes?!? Seems like I was right about you all along.

As far as a pure investment, real estate is not a good choice relative to stocks:

– Un-diversified: too much capital allocated to a single location
– Not liquid
– High carrying costs
– Lower appreciation rate
– Unless it’s an investment property, it does not produce regular income
–

Millennial, I quoted like 5 times that there is no rental parity in So.Cal and you claim that I never used rent-vs-buy calculator (which is a BS tool by itself).

Yeah, RE is not liquid and high selling costs, thanks for letting me know.
You buy RE not to sell high, but as a utility + inflation hedge. There is no utility in stocks, crypto other than speculation in USD (to buy real utility at some point). You all treat RE as real speculative investment, which is fine, but then you are limiting your own strategy.

RE where you live does “produce” an imputed income (it is even taxed in some countries), which is a replacement for costs Yes, there is no rental parity (before accounting for deductions and principal), but it is not significant.

My stepmother passed away in February. It took 10 months to get rid of the squatters that were care giving. I put the house on the market and received 7 offers in one week, the biggest issues were they let the lawn die and destroyed the carpet throughout the entire house. Ended up taking the highest offer at 11k above asking. Just glad the market is what it is and was able to unload this thing at a solid price without any more hassles. The people buying are using a conventional loan 20% down, this will not be their primary residence.

Surge,
“ You all treat RE as real speculative investment, which is fine, but then you are limiting your own strategy.”

Yes RE is absolutely a speculative investment in California. I am on a housing blog for three reasons, I want to buy RE to diversify/ own a home, I am just waiting for a crash to buy in cheap. Second, I am here to read interesting posts, learn about the market trend and to share my strategy to see if I am missing anything. That gives me a good indicator that I am doing the right thing or not. So far I am still not seeing any reason to buy at sky high levels versus sitting on the sidelines and waiting for a crash. Thirdly, it’s very entertaining.

SUrge, btw I never said that I put all of my savings into one basket. I am absolutely a fan of diversification. Over the past years I built up savings (cash), invested in stocks and crypto. Obviously, allocation/portfolios change and there is profit taking as well. I see all of them in a bubble but you can set limits and move fast in crypto. with stocks I just dollar cost avg. real estate is a different game. With real estate it’s all about waiting for the correction and having lots of cash on hand when the downturn comes.

Yes, owning a personal home has a great consumption component. Because you are buying it as a utility and depending on your personal situation. From investment point of view, it is a great inflation hedge and, even at today prices, rental parity is there is you subtract tax savings AND principal component. Yes, your mobility is reduced, it is a downside, but most people even when renting are not going anywhere for years.

Renting is a more flexible mortgage, but mortgage never-the-less. Practically, everyone has liability to pay rent, since they have to live somewhere. Yeah, you are debt-free, but you still owe rent to whomever you are renting from

If you guys think that I am trying to convince you to buy, that is really not my goal.
I am mainly arguing 2 points here.
1) Absolute price is not that critical when buying home for yourself long term. Better price is more protection in case you are forced to sell. You are very unlikely to turn REAL profit on your own home, but you can take a loss on equity.
2) Gaining from rental parity does not necessary gets you ahead. Yes, few hundred $ / week sound a lot, BUT in the context of home prices/volatility it is nothing. Rough estimate is that you can save 1% of home price / year. It works to save for 20% downpayment, since going anything less is crazy in my opinion, but saving rental parity for eventual all-cash purchase is just BS (unless you invest in very high risk investment).

SUrge,
“has a great consumption component. Because you are buying it as a utility”

You can enjoy the same utility by renting. The difference is you save a ton of money by renting and not buying. Once the market crashes you buy in at 50-70% less.
Your monthly mortgage payments will Be a joke compared to what they would be now.

Millennial, you think so?
My place I bought in 2005 lost maximum 30% of paper value at some point.
Today it is maybe 5% more expensive than when I bought it.
If I were to buy today, it would be 10% cheaper in mortgage.
This is after 13 years of inflation, it is still cheaper to buy today than in in 2005.
Yes, it is all function of interest rates, but you get the idea.

The truth is inventory is not low but high. In Orange County there are thousands of houses up for sale which no one buys. The investors buy the houses and jack up the prices. Just read Zillow and Trula, the low inventory stuff is a myth. As for third world, Dallas Texas and Houston Texas now more foreign born than Orange County. The difference is zoning is better in Dallas and Houston and housing is cheaper.. Also, you can afford to go to whiter suburbs in Texas and get away from the minorities. Houston has the third largest illegal immigration population in the US. Atlanta sucks because it has higher crime than even Anaheim since it has black gangs. In fact Portland Oregon is a better bet than either Dallas or Atlanta and more domestic migration is heading to Idaho, Oregon, and Washington state. The only draw back with Portland is radical left wing politics.

“The truth is inventory is not low but high. In Orange County there are thousands of houses up for sale which no one buys. The investors buy the houses and jack up the prices. Just read Zillow and Trula, the low inventory stuff is a myth.”

My words. The realtors I email with are bombarding me daily with listings. Low inventory? Nothinh could be further from the truth. The thing is, nobody in their right mind wants to buy at these ridiculous prices. And why would you? If you need a place to stay you just rent and pay half off of what the mortgage would be. Buying makes zero sense at the peak of the bubble.

Sure, if you look at zillow or something and see hundreds of houses for sale, it will seem like a lot. The trick is actually comparing it to something. One data point is meaningless.

You could both go and actually look at something besides lots of little pictures of houses on a map. I suggest googling “movoto market trends” + the city you want to look at. If you did that – which you won’t, but if you did – you would find that inventory is nearly always low in winter and high in summer. Irvine, for example – inventory on June 1 of 2017 was 679. Today it’s 320. That isn’t UNUSUALLY low, but it is typical for this time of year. Inventory is not high right now by any stretch of the imagination.

“look at zillow or something and see hundreds of houses for sale, it will seem like a lot.”
Yep. Try to explain that to the RE cheerleaders who want to make us believe that inventory is low in order to justify these insane prices. I am not the one who needs to be convinced here. All I need to do is open my email box and see hundreds of houses for sale ( And all are overpriced ).

“The trick is “
No tricks needed. It’s pretty simple. Peak of the bubble. Lots of houses for sale and low sales numbers due to highly inflated price levels.

I work for a home builder in OC and the homes are moving pretty quickly. There might be a lot of homes for sale due to the fact of new homes being built. But nevertheless everyone is still buying and with the economy being in full employment mode, the trend should continue.

147 homes for sale in the pull down menu, 100 in “pre-forclosure”. On the right above the images it says 252 homes for sale. Sort by cheapest there’s many that have been on the market for over 100+ days……..and this is “low inventory”

I did check out your link; and adjusted since you had foreclosures, REO’s, “Coming soon”, make me move, etc….. essentially not real listings and it dropped to 127 for the city; which does seem like a lot.

Then I clicked “pending” and it jumped to 197. So; there are 127 on the market and 70 pending aka “in escrow”. That is a lot of properties under contract which tells me that properties that are priced right are selling and those that are unrealistic are sitting.

I have a suggestion for the good Doctor. I wonder how many of these purchases are primary residences and how many are 2nd or even 3rd homes.

I mention this because in 2016 my X sold her house that she bought in 2005 (at a $30K loss in value I might add) to an all cash “investor” who is now renting it out. Her whole hood turned into about 30% rentals.

The “Pre-foreclosure” stats on Zillow are extremely unreliable Properties that are current will show as pre-foreclosure for months or even years. I know this from my own experience dealing with a property that was in foreclosure.

39K homes for sale for an area with a population of 20M+ and growing daily. Seems pretty tight to me. Socal has a major housing shortage. New construction has not kept up with population growth. This is why the supply of EXISTING homes is tight.

I found a room to rent through Craigslist. The lady I rent from constantly yells at her kids. She really screams at them until they start crying…then she humiliates them by imitating their crying in an over exaggerated fashion. While it can be annoying at times it is strangely comforting to me because it reminds me of my mom yelling at me when I was a kid. This lady is so used to yelling at her kids that sometimes she even yells at me. She lectured me for making the bathroom gross…but it’s her kids not me. Anyway I plan on staying for as long as this housing bubble keeps blowing up because my rent is CHEAP….nobody I know of has such low housing expenses….she even pays the utilities.

Just learned my good friends brother just sold his place in El Sugundo, over Xmas. Bought 5-6 yrs ago for 1.4mil and listed around 2.3mil and had 2 over ask offers in 1 day. Took higher one and moved/bought in Seattle.

Dan, that does not surprise me at all. South bay RE is red hot. The amount of money coming into the area is mind blowing. There is tear down construction on virtually every street. The weather is perfect and you centrally located to LAX, downtown and the major job centers. The public schools are excellent and you will never have a shortage of people who want to live in the area (whether it be buy or rent).

I hope some of the doom and gloomers are right. I would love to buy a rental in the south bay for 50-70% off.

I just want a mother fucking house to live in. I just want to have a house payment that isn’t $4000 a fucking month. I want sanity back into the economy and RE markets not serial bubble blowing and fake news and fraud driving the whole thing.

you can have California and good luck with it, I’m saving my money and getting the fuck out………don’t come crying to the rest of the country when the earthquake hits, but I bet you will. The rich will whine and cry all the way to congress with their hands out just like last time……and get it.

SO stop with the fucking bailouts and favoritism. Had the RE market not been one big fraud department and losers spending 49 months living mortgage free to prop up the banks this RE market would look NOTHING LIKE WHAT IT DOES TODAY.

It’s shocking on how so many are willing to go along and accept a manipulated market and celebrate it……Trump is right, many of these countries are shitholes but so is the USA where “fraud”, “manipulation” and “favoritism” are the order of the day and celebrated.

Dude, I would recommend going to the nearest marijuana dispensary and buying some good crop. Do you honestly think “the market” just started being manipulated last year? I used to be in the same camp and wanted a normal, healthy, non-manipulated market. Guess what, you or I don’t decide that…we’re just along for the ride. Rather than fighting the system, just go along with it and profit from it. It is much easier and much more lucrative in the end.

I welcome the 50-70% drop. That rental property will be paid for in USD cash money!

I think California might be the promise-land of the future so I’m gonna stay put. It will certainly continue to fling itself into the dustbin of history with failed policies, 3rd world plague, and Orwellian government. There will be a total systemic breakdown here and people will continue to leave and flee to Idaho and Texas.

As the population decreases I will ride it out on my farm while riots, disease, fire, and famine ravage California like the liver of hep-C positive street worker. The homeless and 3rd world cockroaches who lack basic survival skills will perish along with the rest of the drug addicted citizenry without the supple titty of the ‘#free shit for everyone!!!!’ government.

The Californians that bought cheap high density gingerbread prefab homes in Ada County will return to the California frontier to enjoy its bargain real estate, clean streets, and low crime rate–all luxuries a result of its new conservative inhabitants that refuse to use gender neutral pronouns and who speak English fluently.

Unlike the rest of my brethren here I don’t imbibe the green gold. Even though it is taught to be nutrient packed like mother’s milk, I have decided to follow other logic based on my life experiences of watching friends get dumber and dumber as they smoke more and more pot. So no, I’m cannabis free and loving it. Plus I can just get a righteous contact high during grow season here when the air is thick with flowering cannabis.

Almost fell of my chair. Walmart raises minimum wage to 11dollars! 11 dollars!!!!! A massive housing boom is coming our way! Prices will go through the roof due to this unexpected demand! You better buy now before you are priced out forever!!!

I realize this is a southern California housing blog, but I wanted to point out that much of the country is doing great. In Idaho, we are at statistical full employment, wages are rising, rents are up, consumer optimism is up — an all around humming economy with happy people.

Sounds fantastic!!! And Yellowstone National park is close by!
Due to your post I requested relocation with my employer. Unfortunately I was told that our tech company does not have any sites In Idaho…..too bad I have to stay put in this 65 degree winter weather over here in SoCal.

“The third tech turning, now in its infancy, promises greater dispersion to other markets, some with strong tech backgrounds, some with far less. In the last two years, according to numbers for the country’s 53 largest metros compiled by Praxis Strategy Group’s Mark Schill based on federal data and EMSI’s fourth-quarter 2017 data set, the STEM growth leader has been Orlando, at 8%, three times the national average. Next are San Francisco and Charlotte (each at 7%); Grand Rapids, Michigan (6%); and then Salt Lake City, Tampa, Seattle, Raleigh, Miami and Las Vegas (5%).”

When Trump won, my stress level went to zero; that, after decades of globalist Clinton, Bush and Obama. At least the talk is in the right direction and no more Clinton. That in itself is progress. The tax cuts, all the regulations cancelled are just the bonus.

There are always positive and negative things about any place in the world. What is heaven to one person is hell to someone else. CA is promoted by the media. People get the idea they can move here, become a barista and live near celebrities.

CA is my home. If I didn’t have ties here and make good money then I would probably move myself. Lots of people struggle but don’t believe all the doom and gloom people here that the sky is falling. I have a plenty of friends and coworkers who are doing just fine.

It’s not all doom and gloom in socal. The economy is booming, everybody who wants a job can get one. There are crowds everywhere you go enjoying life and spending moey. Consumer sentiment is way up. The folks in the desirable areas have made a killing in RE and stocks. It’s supposed to be 70 degrees and sunny this weekend. Life ain’t all that bad here!

Common sense dictates that w/ the removal of lots of regulations, tax cuts for both businesses and individuals, and a business minded POTUS w/ a successful track record (who doesn’t give a SH%^ what anyone thinks); the economy will roar. GDP 4-5%.

Well i’m my strictly middle class enclave of socal where the free money from the FED doesn’t blow into it’s been slow. The restaurants have zero wait times the freeways are wide open. As a matter of fact I went to to Riverside for Turkey day as I do every year and there was ZERO traffic. I didn’t hit the brakes one time and that has NEVER happened in 10 years. One year that drive took me 2-1/2 hours one way and 2 back.

New Years was beyond dead as fried chicken. Norms was packed though. So we headed over to the more pricey Marie Calender’s…….which was a fucking ghost town……which was fine by me.

for every piece of “evidence” you can relay I can counter with the exact opposite. BUT being a rich landlord as you are you don’t know or understand how the “little people” are really struggling…..it’s okay, I get it.

Take that 91 Freeway Monday – Friday on a workday and get back back to me about not hitting the brakes. Not sure where you shop, eat, etc…but the LA economy is booming. We have record low unemployment, deregulation, corporations are hiring and seeing record profits, Joe Six Pack will have more money in his pocket due to the tax plan, super high consumer confidence, record high stock prices, etc. What more proof do you need?

I did hear that Idaho has been attracting a lot of people looking to escape their state. Strong economy, strong libertarian views and beautiful countryside has apparently created a swell of incoming movers.

Idaho works for now. It is the fastest growing state and everyone and their mother I talk to is moving there. Boise is so progressive now you will be a California soon. You’re a baby California. If any place is remotely progressive/hipster then it quickly descends (or ascends if you’re one of them) into a refugee and transient playground with crappy schools and state sponsored cannabis use encouragement. Boise will continue to be impacted by said groups and that will spread north all while the progressiveness of Sandpoint spreads south flanking and encircling places like Council, ID which to date have escaped the plague of extreme liberalism. Soon Council, ID will be teaching 1st graders how to put Magnum condoms on oversized cucumbers all while using gender neutral pronouns. The city workers will pressure walk the sidewalks for Hepatitis A in about 10 years. This is the way of America now. Even Rathdrum isn’t safe.

In all likelihood the Trump economy will continue to grow. GDP may reach 5-6% with the tax overhaul and deregulation combined with his pro business demeanor. A stark contrast to Obama and his crew. That means a strong job and housing market. So buy a sh-tbox and get some room mates.

Just to be clear. It’s NOT a bubble anymore now that Trump is in the white house, right?

AND all that happens to the economy from here on out is now going to be because of Trump policies? I want you to marry Trump to this shit so that when the bubble does pop I can point the finger in the right direction.

Trump was right on the campaign trail, this is a massive bubble IMHO…..again.

So a large portion of people are living in sin. In the olden days people got married, now they literally shack up in the “crap shack.” I will spare you the sermon.
I know some investors who purchase the single family detached home as an investment and then rent it out. Apparently renting is popular as opposed to buying and putting down roots.
Things are changing. Life is not what it use to be 40 years ago in southern California. May be I will move to Texas.

Bob, I hope it soothes your soul that people are not cohabitating for sinful purposes. It is purely financial reasons to prevent them from living in tents. Just like in the 1920”s and 1930’s, churches were trying but overwhelmed trying to keep up with the breadlines.

Then the great Socialist, FDR, was elected by a desperate populace for 16 years and saved us.

About 200 companies so far have announced $1000+ bonuses thanks to the tax cut. And Nancy Pelosi and Elizabeth Warren are out saying it’s chump change. Keep that up Dems into the election. Nothing says “in touch with the middle class” than scoffing at $1000. I know $1000 barely buys you a decent bottle of wine in DC, but out in the real America, it’s a decent chunk of change for most people.

“Holiday sales jumped 5.5 percent compared with last year, marking the largest jump seen since the end of the Great Recession, the National Retail Federation said Friday. Total sales for November and December were $691.9 billion, exceeding the industry trade group’s forecast of between $678.75 billion and $682 billion, which would have been an increase of between 3.6 and 4 percent.”

Just don’t look at the rising consumer debt levels, the highest on record. People can attribute the willingness to borrow to “increasing optimism”, but desperation is more like it, as people are using their credit cards to buy gas and food, and maintain their (deteriorating) standard of living in the face of rising inflation.

Wouldn’t be surprised at all. I recall the same type of optimism 10 years ago before the recession. Consumers were spending recklessly, and GDP growth was much higher than it was now. Underneath the hood was an economic engine running on fumes. Incomes were stagnant, and consumers were borrowing just to maintain their lifestyles.

The current stock market is being fueled by record corporate debt (in the form of buybacks and increased dividends) thanks to prolonged low rates. Much of the borrowed money found its way into real estate. How exactly do RE prices appreciate much more quickly in the past 10 years than they have in the previous ~20 years?

You remember wrong. In early 2008 there was a lot of fear and uncertainty, it was nothing like today. If you look at every metric of confidence, whether consumer, business, we’re off the charts right now. It was pretty high throughout 2017 and then when tax cuts became a reality it zoomed even higher.

I’ve been saying this for weeks now….get ready for 4%+ GDP growth.

Also comparing now to 10 years ago is foolish because 10 years ago we were already 5-6 years into a boom. Today’s boom is barely a year old, having suffered through 8 years of Obama’s depression.

“You remember wrong. In early 2008 there was a lot of fear and uncertainty, it was nothing like today. If you look at every metric of confidence, whether consumer, business, we’re off the charts right now. It was pretty high throughout 2017 and then when tax cuts became a reality it zoomed even higher.”

OK, let me rephrase that — 11 years ago. Even 10 years ago, the consumer confidence index was over 100, a bit lower than it is now, but still good.

“Also comparing now to 10 years ago is foolish because 10 years ago we were already 5-6 years into a boom. Today’s boom is barely a year old, having suffered through 8 years of Obama’s depression.”

Huh? What? I must have slept through the depression and boom that you’re referring to. We’re close to 9 years into the recovery. If a boom hasn’t occurred by now, it mostly likely won’t occur at all. The amount of corporate and consumer debt is so high DESPITE a lukewarm economy that further debt expansion will be too minimal to create a boom.

OK, let me rephrase that — 11 years ago. Even 10 years ago, the consumer confidence index was over 100, a bit lower than it is now, but still good. Very few see the darkening skies before the storm.

“Also comparing now to 10 years ago is foolish because 10 years ago we were already 5-6 years into a boom. Today’s boom is barely a year old, having suffered through 8 years of Obama’s depression.”

Huh? What? I must have slept through the depression and boom that you’re referring to. We’re close to 9 years into the recovery. If a boom hasn’t occurred by now, it mostly likely won’t occur at all. The amount of corporate and consumer debt is so high DESPITE a lukewarm economy that further debt expansion will be too minimal to create a boom.

OK, let me rephrase that — 11 years ago. Even 10 years ago, the consumer confidence index was over 100, a bit lower than it is now, but still good. Very few see the darkening skies before the storm.

“Also comparing now to 10 years ago is foolish because 10 years ago we were already 5-6 years into a boom. Today’s boom is barely a year old, having suffered through 8 years of Obama’s depression.”

Huh? What? I must have slept through the depression and boom that you’re referring to. We’re close to 9 years into the recovery. If a boom hasn’t occurred by now, it mostly likely won’t occur at all. The amount of corporate and consumer debt is so high DESPITE a lukewarm economy that further debt expansion will be too minimal to create a boom.

It is exactly like the roaring 20’s out there. Bubbles everywhere. The party before the storm with a few hints of what is likely to come. ie lack of livable wages, people packing into crapshacks, Tent Trumpvilles.

All the tent cities in Ca were already there before Trump won the election. There are plenty of sources to check. It is not Trump’s fault that people are alcohol and drug addicts and were raised in single parent families and were indoctrinated by the teacher unions. They bought into the liberalism lie and now they suffer the consequences. You are free to choose, but you are not free to choose the consequences.

I agree that bubbles exist everywhere. Artificially inflated housing costs (due to cheap and easy credit) is contributing to the homelessness. Therefore, those tent cities should be called Yellenvilles.

Sometimes I question whether there will be any real estate or economic downturn anytime soon? The stock market is in an extremely strong uptrend. The stock market clearly believes that there is going to be a decade-long, economic boom. Is common sense wrong or is the stock market wrong? Will the US economic expansion continue for another 100 months? I am confused!

With the strong stock market, real estate prices will be taking another jump higher. You have to feel sorry for the people who decided not to purchase months ago because of the new tax law. Thank the dishonest media for that one … they kept telling everyone prices were going to drop. Never listen to the media for financial information. Whenever a Republican is in power, they will always tell you negative financial stories in an attempt to tear the Republican down.

The stock market looks identical to the bull markets of the 1960s, 1980s and 1990s. In each case, the market was correct went it started booming. Only in the case of the 1990s did stock rally start from such a relatively overpriced position. That boom was caused by the internet mania. Is there an equivalent white swan event in America’s future? What is going to cause a period of great American/worldwide prosperity in the 2016-2025 time period? The stock market is clearly seeing something which I can’t see–but the stock market is rarely wrong.

Some of those “news” outlets should not be referred to as news. They are nothing more than propaganda arms and opinion pieces for certain political parties. They are beyond disgusting and one of the reasons Trump won the presidency. They have went full retard since the election…which doesn’t bode well for the Dems in 2020.

If stocks are going to skyrocket for the next 12-18 months, then real estate prices are also likely to go up for another 12-18 months–if only slowly. Late next year (2019), a major decline in home prices will probably start and it will probably last many years (2020-2023)

“The third tech turning, now in its infancy, promises greater dispersion to other markets, some with strong tech backgrounds, some with far less. In the last two years, according to numbers for the country’s 53 largest metros compiled by Praxis Strategy Group’s Mark Schill based on federal data and EMSI’s fourth-quarter 2017 data set, the STEM growth leader has been Orlando, at 8%, three times the national average. Next are San Francisco and Charlotte (each at 7%); Grand Rapids, Michigan (6%); and then Salt Lake City, Tampa, Seattle, Raleigh, Miami and Las Vegas (5%).”

I’m always skeptical if these “hottest cities for X jobs” studies. First off the definition of “tech jobs” can be pretty much anything you want it to be. The guy selling Verizon phones at a mall kiosk is technically a tech job. Second, what is the definition of the city of Orlando or Raleigh vs San Francisco? What these studies often do is mix and match proper cities and entire city regions. So San Francisco is the city itself while Raleigh is the city of Raleigh and every suburb within 30 miles. And this is always the case when cities are compared against each other. Not that there’s some grand conspiracy or anything like that, but people who do the complication are lazy and/or have no clue what they’re talking about.

And also the % change is relative. Grand Rapids going from 100 developers to 120 is a 20% change. That’s YUUUUGE. But really it doesn’t mean jack shit in the gran scheme of things.

Not saying this isn’t happening, but I take any of these so-called studies with about a pound worth of salt grains. Just sayin….

Landlord,:) hey, That would not have been that bad.
No, I am that guy on Twitter who went all in on Tron after a ridiculous pump and sold when it was down 70% ending it with potty talk and how it is all a fraud.
I am done. No more crypto. What’s that return policy on lambos?

Well that is the problem. Nobody knows what the price of anything is. Maybe there will come a crash of 70% next year. Maybe in 5 years there will be a 7% crash. Maybe in 2024 prices will revert back to 2014 prices? Which is why it makes sense when people say here if you plan to live in the house for a decade or two and you can afford it, you probably should buy. If you are so interested in buying you are on this site all week, and you made a million dollars in cryptos, you probably should buy. The longer you are renting the harder it will be to recoup that time and money. If you have been renting since 2010 you might still not break even at a 50%- 70% crash.

Goudy,
“As a matter of fact, if you have been renting since 2010 and there is a 50% crash, houses are back to 2010 prices but you lost 8 years and paid 8 years of rent… lol.

You would be way behind.”

Or you could say, you saved money monthly (8 years) plus the down payment by renting.
This is cash on hand, less financial stress, flexibility, plus the opportunity to invest some of these savings. I would have bought in 2010 but just started my career and had not much savings. If housing goes down to 2010 levels that will be a nice gift I am happy to accept. I am way ahead by waiting, saving and investing compared to buying overpriced real estate in 2014. If 2018 will be close to 2017 in terms of investing that will life changing.

I have been renting since 2010 because I lost two homes in the 2008 crash and the pending divorce did not allow me to have cash reserves to overbid on a crap shack. If I did I would have enjoyed a good valuation as of now. But Ill keep my money in cash reserves and stock market until I retire and move to a cheaper state.

You did not show reasons why it is a consumption item. You only stated that it is illiquid and has high carrying costs.

In fact I do agree with you that buying a home for yourself is not strictly investment…it has a very large consumption/lifestyle component. It is a hybrid buy (Both lifestyle and investment).
This is why I argue that price does not place as much role (of course it still matters) while you guys seem to zero in on price only.

Mentioning or sharing details about crypto holdings on the web is not something you should do at all. I am happy to see the comments. Dear hackers, I don’t own any digital money. And if I would, they would be on Trezor and nano s stored in a safety deposit box at my local bank. Pls don’t attack me. Thank you!

Actually, once you are in it doesn’t hurt to brag about it on the internet or anywhere else, since anyone that buys after that will boost the price. But you only started bragging about it the last few weeks, after every Average Joe already heard about it. Now you want to come across as the crypto guru that got in way early.

I don’t know what a better deal is right now. Real Estate, Crypto Currency (or blockchain technology really), or betting Millennial is a bit full of it. ‘bit’.. get it?

I’ll give it a try to clarify. I never said I invested hundreds of dollars in crypto early on. I said I saved 700 bucks by renting instead of buying. That money went into cash savings stocks and crypto. I wish I would have put more in crypto but really saw this more as a gamble and did not want to risk losing what I can’t afford to lose. Until early 2017 cash and stocks made up the bulk of my portfolio. However, since over a year I started putting more in and it took off like a spaceship. If 2018 is close to last year I am good!

Wheelindealin, sooooo you are calling the end of crypto?
Your are predicting everything goes to zero soon? From my perspective, these dips are great buying opportunity. Could I be wrong? Absolutely! Did buying the dips work out well in the past? Absolutely! Does that mean it will go on forever like this? Hell no. There is never a dull moment in crypto. Enjoy the ride!

I’m hanging on to my Ethereum. Got in at 200 and now 1000 seems low. I still believe this is going to go way up, not because of the cryptocurrency, but because of the blockchain technology. There is already a long list of banks and companies signed up for the Ethereum blockchain. Bitcoin is cryptocurrency that invented the blockchain technology but does not have the smart contracts that I like about Ethereum. If the entire health, banking, real estate, etc. etc… start using the smart contracts, my portfolio will do very well.

Guoudey, wait what?! You are in it too!? Awesome! Let’s talk crypto. I have a good chunk of Eth too but believe you need to have some of the other platforms like ADA and Neo (maybe EOS) as well. eTh is going to be very valuable in the future but has scalability issues. The other ones I mentioned are worth looking into. Eth Is a platform and all erc20 ico’s afe built on it but it has little to do with banks and payment settlements! If you have links that prove me wrong please post it! Ripple is big into payment settlements and specializes in that area. However, what’s stopping banks from creating their own payment settlement network based on cryptography? I think ripple is a bit overhyped (even though I own it too). Anyways, 2018 will be big for crypto. Lots of exciting stuff in the pipeline.

Crypto is definitely a way of the future technology wise, but currently it is strictly speculative asset which is very like ponzi-scheme like. There are 2 components to that; 1) Speculative fear of missing out 2) Anonymity, can move money without border controls.
#1 -> we all know how it usually ends.
#2 -> World banking system is moving towards more transparency, especially across countries. Today’s crypto is basically half step back for every 1-2 made forward towards transparency. Exiting into real currency will be more and more scrutinized.
#3 -> There is also an idea that crypto can be used as short term alternative to fiat money as government deleverage their debt in real $$$.

In general, holding a small amount of crypto is probably good for your portfolio.
As long as you don’t try to convince me that $$$ from rental parity is making you rich 🙂

I’d be interested to know how many properties the average home owner has these days vs in the past. I’d include real estate companies as one owner. I would guess that we have seen a huge uptick in second homes/investment properties given the rise of low rates, real estate internet sites, RE investor friendly laws etc. I wonder how much good building more housing will do if the average working family has to compete with investors who have all the buying power.

I currently own three properties including my principal and would be looking to buy another if prices dipped 25-30% across the board. I would like to eventually pivot towards more rental property and reduce or close my other businesses. Unless Amazon gets into the rental business in S. Cali it’s about as safe a bet as any.

If we are talking about properties that require financing ( obviously excluding cash buyers), then I would probably say significantly less than 10 years ago and here is why.

At that time there were plenty of programs were you could buy an investment property or second home with zero down, and now the only real program available is conventional and that requires 15 to 20% down. FHA and VA can only be used for primary residences and there are jumbo programs available however those require and even higher down payment than conventional financing.

Bottom line is this it is infinitely more difficult to acquire investment property via financing today than it was 10 years ago so I have to assume that the amount of people that are able to purchase investment property now versus then is significantly less.

I would include all properties, fully paid or financed. I agree with you that its more difficult to finance an investment property now, although there are still incentives like including future rent as current income in order to qualify (at least in CA). I think the point i was trying to make is that all the inventory (especially a remotely affordable property) has been bought up. And it was not bought up primarily by first time homeowners, hence the giant rental population. The smart ones bought after the crash, i know i would have if i had the capital.

I bet it is roughly the same as always.
More programs to finance investment properties in the past -> should imply higher prices since you have more financing options.
Either today there are less investors with more holdings or inventory is just tighter preventing everyone from participating.
The market (even manipulated one) balances everything out.

Many wealthy people just don’t want to buy a house and don’t see the necessity for it, especially since their housing expenditure is usually a very tiny fraction of their incomes in any case. One elegant older building here in Chicago on Lake Shore Drive is a rental and always has been, with no intention of converting to co-op or condo, and the rents for a smallish 4-room start at about $11,000. The place is stuffed with trust fund beneficiaries who spend their lives lunching at expensive restaurants, and attending theater and opera. NYC has a huge number of wealthy people who pay rentals many multiples of that. They simply do not want to be bothered by ownership, or setups requiring a lot of servants or management. There are too many interesting things to do in life, to spend it fussing over the management and care of a large house.

“Believe me: We’re in a bubble right now. And the only thing that looks good is the stock market — but if you raise interest rates even a little bit, that’s going to come crashing down,” Trump said. “We are in a big, fat, ugly bubble. And we better be awfully careful.” – Donald Trump – Sept 2016 when the Dow broke 18,000.

Now it is up 40% in about a year and Trump is claiming credit for it???

I am so confused. One of these comments is fake and made up but they came from the same person.

Give me trillions of dollars in Q1, Q2 and Q3 and I’ll make stocks rise again. Obama’s stock market was based purely on pumping money into the system. Trump’s is based on actual growth. I know it’s hard for progs to understand, but trust me on this one, there is a difference.

Your boy king from Chicago didn’t have a single year of 3% GDP growth. He is the only modern day president with that DIShonor. Even the hapless Jimmuh Carter managed 3% growth.

Here’s the final GDP reading for Trump’s first year: 2.6%. Still waiting for an annual reading of 3%+ -regardless- of political affiliation. Since we’re at the tail end of the current economic cycle and credit is tightening, I find it very doubtful that 3% will be reached in the near future.

Remember, this is a consumer based economy. Supply side economics such as bail outs, subsidies, and corporate tax cuts will not create enough income growth to stimulate sustainable customer spending. Especially not when those consumers have to compete with automation and global labor arbitrage in finding good paying jobs. And especially not when high housing costs eats away at discretionary spending.

You know for sure we are at the top of a bubble when flippers are out in full force, cash call is calling your home an atm and some Real Estate agents are accepting bitcoin for purchases. Bring in a hot stock market due to cutting corporate tax rates. Add the screw to anyone without rental investments or stock options and you have a market overheated and ripe for a shift in the market.

I Would love a crash within the next years that knocks out all bubbles (re, crypto and stocks). One more 2017-like year and I am set. You gotta get out before the herds runs for the exit. Not getting too greedy is key

discgman, I also believe that most of the buying is now being done by flippers/investors trying to make a fast buck. The average guy quit buying a long time ago. Prices are too high for him. No one ever got rich overpaying for real estate.

That has to be the silliest comment I have read in some time. The avg guy quit buying? Joking right? Maybe you don’t know a avg guy that is buying in your immediate circle, but, there is a high demand for homes from avg guys aka families. Such a generalized silly comment.

This is what MAGA looks like. After 8 years of Obama’s depression America is firing on all cylinders (and I apologize if I triggered any SJW with the word firing or cylinders or America).

“U.S. factory production rose for a fourth straight month in December, capping the strongest quarter since 2010 and underscoring a resurgence in manufacturing that’s primed for further advances, Federal Reserve data showed Wednesday.”

I would like to know why I hear the market is going to crash every single day. Was I too young to remember this kind of talk or fear? Yes, we are in a boom and wages are not exactly keeping up exactly as they should, but I feel the media manipulates that more then most people want to admit. I believe wages are going up, but not working at Walmart etc

“LORd B. Hold on a sec. you keep telling us almost daily how we should go out and buy and how this is a great time to buy…..However, you don’t buy yourself because you are waiting for a crash to buy more RE??????? You are telling me we are on the same page the whole time???? Which is it? Buy low or buy high? It seems you just want US to buy high but you yourself don’t want to buy unless it crashes?!? Seems like I was right about you all along.”

Lord B is still playing both sides of the RE fence. I’ve called him out on his flip flopping as well.

I was pounding the table HARD a few years ago to go out and buy based purely on rental parity and was almost laughed off the blog. Due to the SIGNIFICANT price rises in socal RE during the past few years I would be very selective if I bought today. I would not hesitate to buy a primary residence in a desirable location today if I could comfortable afford it and planned on staying for the long term. I am in the market to buy an investment property, but not at today’s prices…I would wait for a potential pullback. When will the correction comes and by how much? I have no idea and neither does anybody else. In the meantime, I am happy making tons of money in stock market…to the point of paying cash for my next property.

This is just my opinion, your situation could be different. Diversification is the key to building wealth. Since I already own a primary residence, if the RE market goes up…great, if it goes down…great, I am one step closer to buying my investment property. This is not a hard concept, some people just make it much harder than need be!

The tech company I work for is giving out an additional bonus too due to the expected tax savings. Some of my co workers were quick to complain that the bonus is not as large as other companies pay. Unbelievable, you get free money and you are still not happy? I take Free, unexpected bonuses any day!

$2500 is a godsend for your average Joe and Jane Sixpack family. I’m sure Trump will remind them of this come election time. I’m actually going to be paying more taxes, but I’m ok with that. I would much rather have a healthy economy, job creation, businesses reinvesting money than having a few extra thousand dollars at the end of the year. Didn’t the O-man claim paying taxes is patriotic! 🙂

This article is quite a few years behind. Exotic loans re-appeared with a fervor when inside investors pulled back on their buying spree. The government had to keep the party going by redirecting the cheap and easy credit to the masses.

There are several other stories about these new “financial” products. We all know about the FHA 3.5% down payment program. especially one where a renter was being qualified for a low down payment mortgage from their landlord, which was a REIT. If I can find it, I will add it as a link. But I believe that this blog may have written about it

This was surprisingly an accurate article from a mortgage standpoint. The MGIC change was surprising as they did tighten guidelines. It is really too early to tell on whether this is the start of a mitigation pattern in the industry or an overreaction by a PMI company.

Rising interest rates put even more pressure on housing prices. It’s much better to purchase a house at a lower price and higher interest rate than the other way around (inflated prices with lower interest rate). YOu can always re-finance later at a lower rate. But once you purchased a house at a highly inflated price you are locked in until you sell.

These articles don’t prove anything. You always find articles or predictions that support either side. There are still articles that suggest bitcoin is going away. There were strong predictions that Hillary will win. Articles are often opinions and don’t prove anything. Most people know of course that higher interest rates lead to Lower house prices. Just common sense.

Except I wasnt wrong. How can you say I am wrong in my statement that I will buy when the market drops 50-70%? If it does not drop by that much I simply don’t buy because renting will be cheaper! Much cheaper. Also, I did not call the top a year ago. I said the housing market will crash the next years. I also said there are parts in the country where I would buy because there is rental parity. But, I don’t live in Spokane and I don’t intend to move there. My high paying tech job is here in SoCal and I intend to buy here (maybe in all cash) when the market crashes.
Regarding your articles….there was DATA that Hillary will win the election. You can forecast the wrong data, your predictions can be wrong and statistics can be manipulated. You did not prove anything with your articles. I am happy to agree to disagree. If you think higher interest rates somehow increase house prices, be my guest. Myself and the majority of posters here believe that higher interest rates will put pressure on housing prices. Not much You can do to change my mind. 😉

“How can you say I am wrong in my statement that I will buy when the market drops 50-70%?”

I never said that. I said you’ve been waiting for a 50-70% drop on the coast, believing that a $2m coastal property will drop all the way to $600k before one of hundreds of thousands of moderately wealthy people snatches it up. It’s simply not going to happen. They’ll consider it a steal if it comes on the market at $1.5m.

“I did not call the top a year ago.”

You’ve been saying it’s the peak for as long as you’ve been here.

“there was DATA that Hillary will win the election. You can forecast the wrong data, your predictions can be wrong and statistics can be manipulated.”

You’re confusing data with prediction. If there were 300 homes sold in a given city last month, there were 300 homes sold, period. That’s data. There is no “manipulating” that number. Property sales amounts are public record. Interest rates are public record. Put them on a chart together, and if you see that housing prices consistently dropped when interest rates rose, then you can say there is probably a correlation. That’s analysis, not prophecy.

Just so you know, I am ITCHING for the market to tank. I check prices constantly hoping to see the start of it. No luck yet. But I’m also realistic. 30% on the coast and 50% inland is probably about as bad as it will get in California. Much less in flyover country because there is no bubble there.

Rising interest rates won’t have much of an impact in SoCal. There are plenty of cash buyers and investors that will pounce as soon as prices drop even a little, and all that activity will quickly push prices back up again.

Dan, you are getting closer and closer! I’ll.only buy when the RE market crashes by 50-70 %. Until then I enjoy a cheap rent (compared to buying) and save, save, save. Some of the money I save by renting goes into stocks and crypto. No RE crash means no purchase. I can do that another 12 month or 12 years. I enjoy seeing my bank account grow while others struggle with an overload of debt. Most educated people know that there are economic cycles and nothing goes up forever.

How could there be defaults if it’s “all cash”? How could it be “all cash” when capital controls in China are strict? I’m willing to bet that investors are borrowing that cash. Those loans won’t be so readily available in a higher interest environment and/or when RE sours as an investment.

“I’ve never seen a soft-landing in 53 years” — former Countrywide CEO Angelo Mozilo

True, but higher rate typically mean inflation.
Leveraged (read: most) homes are tricky. Higher rates -> higher payment, but it also means higher inflation in general which drives rental parity (so beloved by some here). So, it is a catch-22. Generally, there is not as much correlation between the rates and prices as many tend to believe (just do some research on it).
Generally, I tend to believe that higher rates cause prices to stagnate in real terms while in absolute terms them might be flat. This is just because inflation is catching up.

Mortgage rates today are 4.375%. The median US home price is around 190K. So these rate increases will have very little impact on most of America. It’s only high price states like Cali that really feel the pain from higher rates. With long term rates suddenly rising after being stagnant last year, it seems that buyers are rushing to lock before rates rise further. At this rate we should be at or close to 5% mortgages by the end of the year.

Going from 4%-5% is roughly 500$ extra on 800k mortgage. Equivalent to 100k in price.
Most people go over their initial budget anyways.
Read the studies about correlation between interest rates and home prices -> not much correlation.
It is all about liquidity events and significant overleveraging.

Serious question here. If we see inflation signals isn’t it preferable to buy and lock in a low rate w/ a fixed payment and pay that debt off through the inflationary period with cheaper and cheaper dollars?

Dan, my position is to buy when you really want/need a home, go long term and not be put off too much by prices (Unless there are clear signals there is going to be liquidity crunch). As long as you are comfortable with payments and ok to ride out bumps and really feel you want a home to own.
Home is usually a great inflation hedge long term (but you do have some maintenance costs).

While nit-picking bits of info here and there, most are missing the big picture:

1) It does not matter if you rent, buy or at which price point you buy.
2) People buy homes not as investment, but as a lifestyle option.(They also rent as a lifestyle option)
3) You will not get rich from buying or not buying a home.
4) You will always find evidence to suit your own belief.
5) It does not matter. (#1 repeated).

Surge, I believe in most of what you are saying with some additional points.

“1) It does not matter if you rent, buy or at which price point you buy.”

It does not matter when you buy as long as you can afford the payments now without undue hardship AND you are planning on holding the house for at least 10 years Buying a house should be long term as a a place to live and a good inflation hedge and not a speculative investment.

“You will not get rich from buying or not buying a home.”

No, but you gain security with buying a house. If I was 35 in 1978 (30 years ago) and I purchased a house, my mortgage would be paid off at 65 and I would be living virtually rent-free for the rest of my life (OK, Prop 13 property taxes and insurance). The same 35 year old paying 1K in rent per month in 1978 , with inflation is now paying 4K per month for rent at 65. By the time they are 90, if they aren’t out in the street with the same inflation, they will be paying nearly 15K per month. How many 65 year olds can afford 4K per month today? How many 90 year olds will be able to afford 15K per month in 25 years?

Buying a house is safety. Rental parity has to take into account the ENORMOUS principal that is being paid each year until the house is owned.

I gave the example of my mom buying in 1974 for 45K (that was considered a mini-bubble in S. CA at the time and A LOT of money) and she paid it off early and was living with $600 per year in insurance and 1K per year in Prop 13 taxes. Rental parity? She was paying about $120 per month to live in a 3 bedroom house within 1 mile of the beach (OK with 1980’s decor but she loved it.) It was home.

Buying early is also important since if I buy my first house at 60, I will be 90 before it is paid off. Time flies by in the 30’s and 40’s with careers and kids and it is easy to overlook the future.

After I was 40, I never refinanced to a 30 year mortgage again. 15 years or less so I could enjoy my elder years.

FRom my view:
Timing is the most important thing since price is everything.
You do understand that if you buy the house at 50-70% less that your mortgage is much cheaper. Therefore, you can afford other stuff, pay off your house earlier, go on nicer vacations etc. saying that price does not matter is the most retar*** thing I have ever heard. I don’t think you are that stup**?

Millennial, I am not sure why you don’t understand the premise that if houses drop 50%-70% it is not opportunity. It is lack of opportunity (liquidity) for 99% of people. If rates go to 20%, yes houses might drop in price but your monthly PMT will not be less. If houses drop 50%-70% because of liquidity event, that means even cash buyers are reluctant to enter. Your prediction and target has no serious merit. In fact I can argue if some conditions cause such a large drop, it would be very risky to buy even at those valuations and even in cash.
When you say Timing is Everything, you put your entire strategy on single thing that you cannot even control that well. (except do nothing perpetually).

Bob, rental parity is there even today if you consider a) tax breaks b) principal. It is there from day1 and only gets better with time. Again, as you mention, assuming long term and comfortable payment from day1 (and good cash cushion for other investments).

Nobody knows when the crash will occur. Jim Taylor is the least prophetic and I thought both stocks and houses it would crash last year.

Ray Dalio was interviewed at Davos and thinks.

1) There is a lot of cash on the sidelines and people feel stupid to be in cash now.
2) There is a spurt in the economy now that will cause the stock market and housing
to rise due to consumer confidence for the next 12-24 months.

The stock market rose 30% last year and I am sitting on cash. I feel stupid.
How much will housing and stocks rise in the next year with a booming economy?
How many will be cashing out their 60% stock gains to buy a house?

When it does crash in a year, how far will it fall?

ie if it goes up 30% in a year and crashes 30%, why not buy now?

Interest rates are going up also. How much panic buying will be happening in the next year?

I believe that if you buy now and hold for at least 10 years, you will have a lot of principal paid during that time and 1/3 of the way to owning a house.

Millennial, obviously price does matter, but it just cannot be single thing to look at. Because you cannot predict and control it.
Unless you are trolling everyone, your strategy of waiting for 50% crash has a very low chance of actually coming to fruition. Which is fine, it is not the end of the world for anyone.
The reasons you cite are strictly academic and have no bearing on real world.
Waiting for a serious crash is generally a very poor strategy (stocks, housing, etc…) Time is also a very serious component in it.
Maybe in 20 years prices do crash 50%-70% (from their current level). so what, what does it matter then.

Just think about this…if interest rates overnight change to 20%, yes the housing will crash. Now, would you throw all your cash in a home OR you would think about putting some of the money in CD instead and earn some interest (and leverage home purchase?)

Such home can be rented for very high 3000s to 4k+ / month. Principal you pay to increase your equity, so effectively it is your savings

Here is your rental parity.

I am not counting opportunity cost of 200k down, but it is part of investment to capture leveraged appreciation (if homes to increase in value). So, you do earn a profit on it (as long as home rise in price, even marginally).

Surge,
I appreciate you are putting the time in to map out your example! Thank you!
Also, I know now you are out of your mind.
No wonder people are way over their head and foreclose when recessions hit.
For starters, your example is as far away from rental parity as a zebra from Iceland.
You are telling me that a buyer pays down 200k and pays 1500 more a month than a renter and you call this rental parity?!?????????? And paying 1200 principal is somehow paying obey to yourself????? As if it would be the same as saving 1200 in your bank account?!? No wonder you are so confused and think price does not matter! This night pop your bubble but someone has to do it…..if you buy an overpriced asset, the principal is way higher than it should be/needs to be. Someone who buys the same house after the crash for 30 % (for example) less pays way less principal. In your mind, the guy who buys high somehow is winning because the inflated principal is “paying money to yourself”???? If you pay 200k down your monthly rate should be way, way, way below the rental rate. Not 1500 more!!! Also, conveniently you left out maintenance costs for owners and opportunity costs of the 200k.

Millennial,
Yes, this is true. It takes $$$ to live well whether buying prime locations or renting.
When younger, you want to experience live so you want to live well -$$$ on Travel, cars, girls. When have family you want to live in a nice home. All is good as long as yiu are making nice income and not underleveraged. There are only so many number of years you have, life moves forward and sometimes you do not want to wait years to get what you want for youself and family.
Now, back to my example: you conviniently 2 things that I did indeed mention: interest deduction brings it down to 900$ (not 1.5k). Yes, principal is your own savings mechanism (debt resuction). And I did mention 200k opportunity cost – 200k is your investment into RE price (which might go up or down).

Yes, it is obvious is re crashes by 30% then there is opportunity to pay 300k less in principal. But, unless you pay cash, it is most likely higher interest rate and you will end up paying similar total amount over years.

If 200k number scares you, what are you talking about buying cash when everything crashes?

Man. ACF or should call you gold digger. You found the nugget!
Built in 1965, a bargain of $467 hoa’s and only over 180 days on the market! Wait, over 180 days??? We are told there is no inventory and here ACF finds such a treasure and nobody buys it??? ACF that was a big mistake posting this golden opportunity here…..now it will be sold in no time. Wouldn’t be surprised if it already has 10 offers above asking! Next time, don’t post them, just buy them and tell us later! With your skills you could make a lot of money! Your are like the next Warren B.!

Btw, every/business investment is cash flow negative in the beginning.
You are out of your mind if you think that there ever was a rental parity with 0% down andeven with 20% down you are rarely at rental parity. This is following your definition that principal does not count. And by your definition prople taking on 15year morgages (usually more affluent/conservative) are even crazier because they are even farther away grom rental parity.
You have no real experience or idea. You learned 2 concepts (rental parity and riding rates) and trying to act smart here. Shame on you

Oh oh is Surge is getting emotional here? I gotta say I am so happy he posted his rental parity example!
RE cheerleader: Listen up people we have rental parity in SoCal! All you need to do is pay 200k down and pay 1500 More a month than a renter! Rental parity!!!
Potential buyer: Huh? wait, the renter did not have to put 200k down, lives in the same house and pays less a month?? How is that a parity?
RE cheerleader: What?!? You doubt there is rental parity here?? How dare you?? every business starts cash flow negative!! Paying down debt is basically paying yourself!!!
Potential buyer: Wait, didn’t you say a house is no investment and therefore shouldn’t be seen as such(like a business)? Anyways, if paying down highly inflated debt is the same as paying yourself how come the money does not show up in my bank account?
RE cheerleader: you have no idea and no experience and 200k down payment scare you! Haha!
Potential buyer: uh, I actually have more than that in the bank and if you claim to have soo much more experience (in buying at the top) I am a bit shocked you don’t understand what rental parity means.

I’ve bought 15+ houses in my life. And each time the appraisal – MIRACULOUSLY!! – always came in right around the sales price, give or take 1%. Appraisers don’t give a shit about actually appraising. They just want to help the deal along. If an appraiser is the cause of deals falling through, guess what happens to that appraiser? Nobody hires him (and yes 99% of them are guys) again. So the easy way for appraisers to keep making money is appraise homes at a value that makes everyone happy and closes the deal.

The truth is the guy doing the appraisal on-site isn’t doing anything more than the Indian. They both just use existing sales data and adjust the property for extra bedrooms, more sq. ft, etc, massage the numbers until it hits the target.

Why pay someone $400-500 to do it on-site when the Indian guy will do the exact same thing for $25-50?

What you say is true. Everyone knows how the game is played. For a small investor such as yourself it’s no big deal. However, the SEC has a different opinion when it comes to issuing securities.

A licensed appraiser (while he can be swayed to inflate values) has some liability. You can go after that person, he can lose his license or his freedom in the case of fraud. Good luck going after the guy in India.

The problem becomes when this method is used for thousands of homes which are securitized for billions of dollars sold to Joe Public. It’s an increased risk that’s not necessarily disclosed to investors or reflected in the bond rating.

Done right (i.e., not just using the Zestimate), a drive by appraisal will actually get you fairly close to the number that a traditional appraisal would give you. Upgrades are frequently worth zilch, both to an appraiser and as far as offer amounts (although they will get you more offers), so for the most part the appraisal is based on sold comps nearby with adjustments made for number of bedrooms, etc. All of which can be done with info available online and a little math. Someone who knows how could come up with a pretty accurate amount for a typical tract home in less than 10 minutes. Another 30-60 minutes to plug all those numbers into a report template.

Knowing how to prepare an appraisal, I’m not a fan of what the traditional service has become. Too much money for too little actual work. But it’s “official”, and even though it may be prepared by someone who is completely brain dead, I guess that two hours (including visit, measurements, and pictures) is worth $300-400.

I saw a home for sale today which actually tempted me. After a while, anything which is not greatly overpriced starts to look cheap. At the last bottom, it was selling for about $525K and now has an asking price of $800K–a 52% increase in 6 years. Still it looks cheap compared to its competition.

I still pick up pennies I find in the street, but a !K bonus this year does not make up for years of slave wages. I listened to Jamie Dimon in a Davos interview who said they will open multiple new Chase banks this year in new cities. He said they will be high paying jobs paying 37K per year. I laughed. When I graduated from college in the late 80’s, high paying was 30K/year for a starting salary. With inflation, that should be 67K now. I think we have a problem.

A few years ago there was a proposal to reduce food stamps by something like $30/mo. And the left went to full hyperventilating mode, claiming that would lead to children starving in the streets.

Today, the same leftists look at $1000 bonus and scoff at it as – quoting Nancy Pelosi – is just crumbs.

So $30/week is the difference between life and death, but $1000 (which is $40/week), is a big old meh.

It’s fascinating watching the liberal mind spin…..

As for $37K a year, as an entry level position, it’s very good. Most tellers spend 1-2 years on the job before moving up the ladder to better paying jobs. And it’s $37K, plus benefits, plus 401k matching, paid vacation etc, which puts the full value of the position closer to $50K.

Oh, come on, 37K per year is not a good salary. You can survive on it. It should be minimum wage by definition.

Established guidelines say you should not spend more than 30% of your income on housing. That is $900/month on 37K/year wages.

In S. CA, you will definitely need a roommate at that salary. This is what the Dr is reporting in the article above.

For a mortgage to keep PITI below $900/month, you can buy a 175K house with a 140K loan at 4% to make the PITI work.
Not a chance in S.CA and very hard to do in most cities in the US (unless the house needs 100K in reno to make it livable).

When the elite is saying 37K/per year is a good salary, we are all doomed.

Anecdotally, in 1989 while making 33K per year, I bought a S. CA 3 bd 2 bath 1963 house for 250K. The PITI exceeded my income limits (about 50% at 10% mortgage interest) so I needed my parents to co-sign. I should have kept it since now it is worth $800K.

To defend Millennial, in 2009, I could have bought the same house back for 350K.

We have become a sadly underpaid nation with the elites throwing out 1K crumbs to temporarily appease the masses.

Bob seems to have a political axe to grind. For a young two income earner household, let’s say the husband brings in $50K and then the wife gets a $37K job at the Chase branch down the street in middle America, yeah it’s not shabby really. Talk about out of touch with the rest of the country. And these people still can’t figure out why Trump really was elected. By the way the $37K Dimon refers to is probably the starting salary for an entry level position.

Telling someone that they have to get married to afford a basic living wage that covers rent is exactly why the good Dr is correct. People are either moving back home or finding roommates even with a college education in finance. Wages are so low and rents are so high that even the “good paying” jobs can’t cover the basic necessities to live.

I did a quick check, and one bedroom rentals in 35 out of the 50 cities polled are over $900/month. Today, you need a roommate or move back home to live on a 37K/year “good” salary.

This isn’t a political axe, it is reality. It wasn’t this way when I was a recent college grad in the late 1980’s making 30K/year(67K/year in today’s inflation adjusted dollars)

It’s not uncommon you know. If you are brainwashed (it’s always a good time to buy, price does not matter, buy now or you are priced out forever) it’s hard to save and wait for a buying opportunity. It’s not necessary your fault either. I can see how this causes headaches.

When has anyone here ever said “it’s always a great time to buy” or “price doesn’t mater”? What I and other have said is, generally speaking real estate is a good long term investment. But no sane investor would ever utter the words “price doesn’t matter”.

I hope you’re not a smoker, because with all those straw-men around you, you could easily start a fire.

You would need to go back to DR HB’s article posted a couple weeks ago to find this:
aaronD
January 3, 2018 at 3:41 pm
(…) The price of the house will not and should not matter because you have locked in a fixed rate for 30 years. (…)”

Next one, look at Surge’s post above.
January 22, 6:25pm
“(..) most are missing the big picture here:
1) it does not matter if you rent, buy or at which price point you buy”

While I think Millennial is vastly underestimating how long the pain will stick around in the California market, he’s pretty spot on about the insinuation being made around here. Sure, these things are not being said directly but there has been a ton of comments over the past couple years about how incomes essentially don’t matter because of rich investors and the like. Rental parity assuredness in expensive locations is another popular favorite that gets tossed around a lot, so yeah he isn’t totally off base.

Millie, you caught me, except for the fact that this was a philosophical rant.
Yes, after 15-20 years it won’t matter for how much you bought. My parents bought 15 years for 150k, now it is 700k. Does it matter they bought for 150k and not 200k or 100k?
You are honestly over analyzing this shit. You have not proposed any comeback to much information argued to you other than “50% crash” and ” interest rates will lower prices”.

Avi, incomes do matter and stability of income is the most important thing.
Prices – not so much. Yes, they do matter for downpayment downside protection, but in a long run, the difference is a wash.
Somehow, assumption is that everyone who is buying at todays prices is over-leveraging and speculating that prices will go up. True, a lot do, but good majority does not.

Also, rental parity is important but by far not everything.
No investment/business is cash flow business in the beginning, especially when your investment is partially a lifestyle option. It is not all about rental parity and sometimes you need to take a longer view.

I can bet that if market crashes 50%, rental parity still won’t be there. Just because such crash is likely be at least partially be caused by something to cause rents to plummet, thus investors dropping homes. It’s not like IF (big IF) homes crash and rents stay the same.

Usually: Rent is roughly = PITI – Fed tax break – Principal (for home ownership)
Run it across many properties, surprisingly it is accurate within couple of hundred bucks.
For rental, you need to put 30%-40% down to cash flow negative (but building serious equity)

If someone disagrees, please provide numbers and counter-examples, instead of boring blanket statements.
Disclaimer: nobody urges anyone to buy, you are never priced out forever. 🙂

Millennial, you think it is a parody because you do not seem to be taking a long view on everything. You think you deserve rental parity from day 1 and with 0% down, even though it never was and it is not meant to be. This is why it seems shocking to you.

I bet if you take 20 years ago and look at similar RE forums, there was another “Millennial” like you saying the same things.
The only point you are making that it is best to buy low and sell high. Of course it is valid. My counter-point is: a) in RE it is almost impossible to find a bottom and you might lose more waiting for one b) You should not plan on selling RE in near term.

Well folks it appears we are actually going to experience some real inflation this year with billions of dollars being pumped into the economy via corporate tax breaks and repatriation how could we not? The rise of long term & mortgage rates since the first of the year is just the start. CD rates have been jumping as well for the past couple weeks. I feel this is just the beginning and inflation will drive up housing prices further in 2018.

Inflation means the value (purchasing power)of your money decreases. In other words your debt will become less valuable. A great thing to have lots of debt, right? When you accumulate 20.6 trillion of debt it’s not a bad idea to increase inflation. While wages are flat house prices will increase and people will continue to drive up their debt burden. Saving rates per households are way down. Nothing to see here! Keep on spending! America is going to be great again! Feels weird to sit on cash and wait for a collapse, right? Everything is going so well for the ones who are deep in debt, right… Right? The next 15-20 years will be booming years for real estate and stocks? Why even have a housing bubble discussion? We have seen nothing yet! Well, let’s wait and see 😉

Millie, what you say would be true if the feds did not raise interest rates to counter inflation. As inflation rears it’s ugly head interest rates rise and the dollar becomes more valuable. Loans are more expensive whether they be cars, mortgages, credit cards, etc. Any government heavily in debt thrives on a low-interest rate scenario, not the other way around.

Apart from rent a lot has to with the disintegration of the society on the whole. Families are breaking up and people are getting more skeptical about each other. Having a roommate is an easy way for millennials to have some sort of company in their lives. Just as mentioned in the article, so many of them are marrying late or not getting into marriage at all.

100% agreed. In a world of uncertainty the last thing you want to do as a millennial is to sign up for liabilities (marriage, buying a house). You want to stay single and flexible. At least that’s what most millennials do. I am married and I intend to buy a house when we get a nice crash. But most millennials will exactly do what is described in dr. HB blog. That’s why it’s so hilarious to see these posts every year here saying THIS is the year when millennials go out and buy in droves! I predict we will see these posts the next five years and nothing materializes. Let’s see and enjoy it! The millennials I meet and talk to want one thing: change the system and don’t participate in the current system.

Millennials are just like another generation. Yes, marrying/children/house is taking few years longer, but it is not because this is what generation decided, this lifestyle is rather marketed very well
Every gen think they are different, but in reality everyone is the same.
Gen-x, Millennials, etc… are terms invented by marketers to create market fragmentation. You can just say Younger People, Older People, etc…

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